##### 





UNITED
    STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC
    20549
  FORM 10-K
  [X]
 ANNUAL REPORT
    PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES
    EXCHANGE ACT OF 1934
 For
    the fiscal year ended December 31, 2007
 OR
 o
 TRANSITION REPORT
    PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES
    EXCHANGE ACT OF 1934
 For
    the transition period
    from          
    to
  Commission

Registrant; State
    of Incorporation;

IRS EmployerFile
    Number

Address; and
    Telephone Number

Identification
    No.1-9513

CMS Energy Corporation
    (A Michigan Corporation)
    One Energy Plaza, Jackson, Michigan 49201(517) 788-0550

38-27264311-5611

Consumers Energy Company
    (A Michigan Corporation)
    One Energy Plaza, Jackson, Michigan 49201(517) 788-0550

38-0442310   Securities
    registered pursuant to Section 12(b) of the Act:
 Name of Each
    ExchangeRegistrant

Title of
    Class

on Which
    RegisteredCMS Energy Corporation

Common Stock, $.01 par value

New York Stock ExchangeCMS Energy Trust I

7.75% Quarterly Income Preferred Securities

New York Stock ExchangeConsumers Energy Company

Preferred Stocks, $100 par value: $4.16 Series, $4.50 Series

New York Stock Exchange  Securities
    registered pursuant to Section 12(g) of the
    Act: None
  Indicate
    by check mark if the Registrant is a well-known seasoned issuer,
    as defined in Rule 405 of the Securities Act.
  CMS
    Energy
    Corporation: Yes [X] No oConsumers
    Energy
    Company: Yes [X] No o
  Indicate
    by check mark if the Registrant is not required to file reports
    pursuant to Section 13 or Section 15(d) of the Act.
  CMS
    Energy
    Corporation: Yes o No [X] Consumers
    Energy
    Company: Yes o No [X]
  Indicate
    by check mark whether the Registrant (1) has filed all
    reports required to be filed by Section 13 or 15(d) of the
    Securities Exchange Act of 1934 during the preceding
    12 months (or for such shorter period that the Registrant
    was required to file such reports), and (2) has been
    subject to such filing requirements for the past
    90 days.  Yes [X] No o
  Indicate
    by check mark if disclosure of delinquent filers pursuant to
    Item 405 of
    Regulation S-K
    is not contained herein, and will not be contained, to the best
    of Registrants knowledge, in definitive proxy or
    information statements incorporated by reference in
    Part III of this
    Form 10-K
    or any amendment to this
    Form 10-K.o
  CMS
    Energy Corporation:
 Indicate
    by check mark whether the Registrant is a large accelerated
    filer, an accelerated filer, a non-accelerated filer, or a
    smaller reporting company. See the definitions of large
    accelerated filer, accelerated filer and
    smaller reporting company in Rule 12b-2 of the
    Exchange Act. (Check One):
  Large accelerated
    filer x

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Consumers
    Energy Company:
 Indicate
    by check mark whether the registrant is a large accelerated
    filer, an accelerated filer, a non-accelerated filer, or a
    smaller reporting company. See the definitions of large
    accelerated filer, accelerated filer and
    smaller reporting company in Rule 12b-2 of the
    Exchange Act. (Check One):
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer x

Smaller reporting
    company o(Do not check if a smaller reporting company)   Indicate
    by check mark whether the Registrant is a shell company (as
    defined in Exchange Act
    Rule 12b-2).
  CMS
    Energy
    Corporation: Yes
    o No [X] Consumers
    Energy
    Company: Yes o No [X]
  The
    aggregate market value of CMS Energy voting and non-voting
    common equity held by non-affiliates was $3.863 billion for
    the 224,583,688 CMS Energy Common Stock shares outstanding on
    June 30, 2007 based on the closing sale price of $17.20 for
    CMS Energy Common Stock, as reported by the New York Stock
    Exchange on such date.
  There
    were 225,177,071 shares of CMS Energy Common Stock outstanding
    on February 19, 2008. On February 19, 2008, CMS Energy
    held all voting and non-voting common equity of Consumers.
  Documents
    incorporated by reference: CMS Energys proxy
    statement and Consumers information statement relating to
    the 2008 annual meeting of shareholders to be held May 16,
    2008, is incorporated by reference in Part III, except for
    the compensation and human resources committee report and audit
    committee report contained therein.




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##### 





CMS Energy
    Corporation
 And
 Consumers Energy
    Company
  Annual Reports on
    Form 10-K
    to the Securities and Exchange Commission for the Year Ended
 December 31,
    2007
  This combined
    Form 10-K
    is separately filed by CMS Energy Corporation and Consumers
    Energy Company. Information in this combined
    Form 10-K
    relating to each individual registrant is filed by such
    registrant on its own behalf. Consumers Energy Company makes no
    representation regarding information relating to any other
    companies affiliated with CMS Energy Corporation other than its
    own subsidiaries. None of CMS Energy Corporation, CMS
    Enterprises Company nor any of CMS Energys other
    subsidiaries (other than Consumers Energy Company) has any
    obligation in respect of Consumers Energy Companys debt
    securities and holders of such securities should not consider
    CMS Energy Corporation, CMS Enterprises Company nor any of CMS
    Energys subsidiaries (other than Consumers Energy Company
    and its own subsidiaries (in relevant circumstances)) financial
    resources or results of operations in making a decision with
    respect to Consumers Energy Companys debt securities.
    Similarly, Consumers Energy Company has no obligation in respect
    of debt securities of CMS Energy Corporation.
  TABLE OF CONTENTS
  PageGlossary



4PART I:Item 1.

Business

11Item 1A.

Risk Factors

25Item 1B.

Unresolved Staff Comments

32Item 2.

Properties

32Item 3.

Legal Proceedings

32Item 4.

Submission of Matters to a Vote of Security Holders

37PART II:Item 5.

Market for Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities

38Item 6.

Selected Financial Data

38Item 7.

Managements Discussion and Analysis of Financial Condition
    and Results of Operations

39Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

39Item 8.

Financial Statements and Supplementary Data

40Item 9.

Changes in and Disagreements With Accountants on Accounting and
    Financial Disclosure

CO-1Item 9A.

Controls and Procedures

CO-1Item 9B.

Other Information

CO-2PART III:Item 10.

Directors, Executive Officers and Corporate Governance

CO-3Item 11.

Executive Compensation

CO-3Item 12.

Security Ownership of Certain Beneficial Owners and Management
    Related Stockholder Matters

CO-4Item 13.

Certain Relationships and Related Transactions, and Director
    Independence

CO-5Item 14.

Principal Accountant Fees and Services

CO-5PART IV:Item 15.

Exhibits, Financial Statement Schedules

CO-5  2




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3




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GLOSSARY     ABATE

Association of Businesses Advocating Tariff EquityABO

Accumulated Benefit Obligation. The liabilities of a pension
    plan based on service and pay to date. This differs from the
    Projected Benefit Obligation that is typically disclosed in that
    it does not reflect expected future salary increases.AEI

Ashmore Energy International, a non-affiliated companyAFUDC

Allowance for Funds Used During ConstructionALJ

Administrative Law JudgeAMT

Alternative minimum taxAOC

Administrative Order on ConsentAOCI

Accumulated Other Comprehensive IncomeAOCL

Accumulated Other Comprehensive LossAPB

Accounting Principles BoardAPB Opinion No. 18

APB Opinion No. 18, The Equity Method of Accounting for
    Investments in Common StockAPT

Australian Pipeline TrustARO

Asset retirement obligationBay Harbor

A residential/commercial real estate area located near Petoskey,
    Michigan.  In 2002, CMS Energy sold its interest in Bay Harbor.bcf

One billion cubic feet of gasBig Rock

Big Rock Point nuclear power plantBig Rock ISFSI

Big Rock Independent Spent Fuel Storage InstallationBoard of Directors

Board of Directors of CMS EnergyBroadway Gen Funding LLC

Broadway Gen Funding LLC, a non-affiliated companyBtu

British thermal unit; one Btu equals the amount of energy
    required to raise the temperature of one pound of water by one
    degree FahrenheitCAMR

Clean Air Mercury RuleCEO

Chief Executive OfficerCFO

Chief Financial OfficerCFTC

Commodity Futures Trading CommissionCity gate arrangement

The arrangement made for the point at which a local distribution
    company physically receives gas from a supplier or pipelineCKD

Cement kiln dustClean Air Act

Federal Clean Air Act, as amendedCMS Capital

CMS Capital, L.L.C., a wholly owned subsidiary CMS EnergyCMS Energy

CMS Energy Corporation, the parent of Consumers and EnterprisesCMS Energy Common Stock or common stock

Common stock of CMS Energy, par value $.01 per shareCMS Electric and Gas

CMS Electric & Gas Company, L.L.C., a subsidiary of
    EnterprisesCMS ERM

CMS Energy Resource Management Company, formerly CMS MST, a
    subsidiary of EnterprisesCMS Field Services

CMS Field Services, Inc., a former wholly owned subsidiary of
    CMS Gas TransmissionCMS Gas Transmission

CMS Gas Transmission Company, a wholly owned subsidiary of
    EnterprisesCMS Generation

CMS Generation Co., a former wholly owned subsidiary of
    Enterprises 4




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##### 



CMS International Ventures

CMS International Ventures LLC, a subsidiary of EnterprisesCMS Land

CMS Land Company, a wholly owned subsidiary of CMS EnergyCMS Midland

Midland Cogeneration Venture Group II, LLC, successor to CMS
    Midland Inc., formerly a subsidiary of Consumers that had a
    49 percent ownership interest in the MCV PartnershipCMS MST

CMS Marketing, Services and Trading Company, a wholly owned
    subsidiary of Enterprises, whose name was changed to CMS ERM
    effective January 2004CMS Oil and Gas

CMS Oil and Gas Company, formerly a subsidiary of EnterprisesConsumers

Consumers Energy Company, a subsidiary of CMS EnergyCourt of Appeals

Michigan Court of AppealsCPEE

Companhia Paulista de Energia Eletrica, in which CMS
    International Ventures formerly owned a 94 percent interestCustomer Choice Act

Customer Choice and Electricity Reliability Act, a Michigan
    statute enacted in June 2000DCCP

Defined Company Contribution PlanDC SERP

Defined Contribution Supplemental Executive Retirement PlanDekatherms/day

A measure of the heat content value of gas per day; one
    dekatherm/day is equivalent to 1,000,000 British thermal units
    (Btu) per dayDetroit Edison

The Detroit Edison Company, a non-affiliated companyDIG

Dearborn Industrial Generation, LLC, a wholly owned subsidiary
    of CMS EnergyDOE

U.S. Department of EnergyDOJ

U.S. Department of JusticeDow

The Dow Chemical Company, a non-affiliated companyDTE Energy

DTE Energy Company, a non-affiliated companyEISP

Executive Incentive Separation PlanEITF

Emerging Issues Task ForceEITF Issue
    02-03

EITF Issue No. 02-03, Issues Involved in Accounting for
    Derivative Contracts Held for Trading Purposes and Contracts
    Involved in Energy Trading and Risk Management ActivitiesEITF Issue
    06-11

EITF Issue No. 06-11, Accounting for Income Tax Benefits
    of Dividends on Share-Based Payment AwardsEl Chocon

A 1,200 MW hydro power plant located in Argentina, in which
    CMS Generation formerly held a 17.2 percent ownership
    interestEntergy

Entergy Corporation, a non-affiliated companyEnterprises

CMS Enterprises Company, a subsidiary of CMS EnergyEPA

U.S. Environmental Protection AgencyEPS

Earnings per shareExchange Act

Securities Exchange Act of 1934, as amendedFASB

Financial Accounting Standards BoardFERC

Federal Energy Regulatory CommissionFIN 14

FASB Interpretation No. 14, Reasonable Estimation of Amount of a
    LossFIN 46(R)

Revised FASB Interpretation No. 46, Consolidation of Variable
    Interest EntitiesFIN 47

FASB Interpretation No. 47, Accounting for Conditional Asset
    Retirement ObligationsFIN 45

FASB Interpretation No. 45, Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others 5




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##### 



FIN 48

FASB Interpretation No. 48, Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement No. 109First Mortgage Bond Indenture

The indenture dated as of September 1, 1945 between Consumers
    and The Bank of New York (ultimate successor to City Bank
    Farmers Trust Company), as Trustee, and as amended and
    supplementedFMB

First Mortgage BondsFMLP

First Midland Limited Partnership, a partnership that holds a
    lessor interest in the MCV FacilityFSP

FASB Staff PositionFSP
    FIN 39-1

FASB Staff Position on FASB Interpretation No. 39-1, Amendment
    of FASB Interpretation No. 39GAAP

Generally Accepted Accounting PrinciplesGasAtacama

GasAtacama Holding Limited, a limited liability partnership that
    manages GasAtacama S.A., which includes an integrated natural
    gas pipeline and electric generating plant in Argentina and
    Chile and Atacama Finance Company, in which CMS International
    Ventures formerly owned a 50 percent interestGCR

Gas cost recoveryGoldfields

A pipeline business in Australia, in which CMS Energy formerly
    held a 39.7 percent ownership interestGVK

GVK Facility, a 250 MW gas fired power plant located in
    South Central India, in which CMS Generation formerly held a
    33 percent interestGWh

Gigawatt hour (a unit of energy equal to one million kilowatt
    hours)Hydra-Co

Hydra-Co Enterprises, Inc., a wholly owned subsidiary of
    EnterprisesICSID

International Centre for the Settlement of Investment DisputesIPP

Independent power producerIRS

Internal Revenue ServiceISFSI

Independent spent fuel storage installationITC

Income tax creditJamaica

Jamaica Private Power Company, Limited, a 63 MW
    diesel-fueled power plant in Jamaica, in which CMS Generation
    formerly owned a 42 percent interestJorf Lasfar

A 1,356 MW coal-fueled power plant in Morocco, in which CMS
    Generation formerly owned a 50 percent interestJubail

A 240 MW natural gas cogeneration power plant in Saudi
    Arabia, in which CMS Generation formerly owned a 25 percent
    interestkilovolts

One thousand volts (unit used to measure the difference in
    electrical pressure along a current)kWh

Kilowatt-hour (a unit of energy equal to one thousand watt hours)LS Power Group

LS Power Group, a non-affiliated companyLucid Energy

Lucid Energy LLC, a non-affiliated companyLudington

Ludington pumped storage plant, jointly owned by Consumers and
    Detroit Edisonmcf

One thousand cubic feet of gasMCV Facility

A natural gas-fueled, combined-cycle cogeneration facility
    operated by the MCV PartnershipMCV GP II

Successor of CMS Midland, Inc.MCV Partnership

Midland Cogeneration Venture Limited Partnership 6




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MCV PPA

The Power Purchase Agreement between Consumers and the MCV
    Partnership with a 35-year term commencing in March 1990, as
    amended, and as interpreted by the Settlement Agreement dated as
    of January 1, 1999 between the MCV Partnership and ConsumersMD&A

Managements Discussion and AnalysisMDEQ

Michigan Department of Environmental QualityMDL

Multidistrict LitigationMETC

Michigan Electric Transmission Company, LLC, a non-affiliated
    company owned by ITC Holdings Corporation and a member of MISOMidwest Energy Market

An energy market developed by the MISO to provide day-ahead and
    real-time market information and centralized dispatch for market
    participantsMISO

Midwest Independent Transmission System Operator, Inc.MMBtu

Million British Thermal UnitsMoodys

Moodys Investors Service, Inc.MPSC

Michigan Public Service CommissionMRV

Market-Related Value of Plan assetsMSBT

Michigan Single Business TaxMW

Megawatt (a unit of power equal to one million watts)MWh

Megawatt hour (a unit of energy equal to one million watt hours)Neyveli

CMS Generation Neyveli Ltd, a 250 MW lignite-fired power
    station located in India, in which CMS International Ventures
    formerly owned a 50 percent interestNMC

Nuclear Management Company LLC, formed in 1999 by Northern
    States Power Company (now Xcel Energy Inc.), Alliant Energy,
    Wisconsin Electric Power Company, and Wisconsin Public Service
    Company to operate and manage nuclear generating facilities
    owned by the utilitiesNREPA

Michigan Natural Resources and Environmental Protection ActNYMEX

New York Mercantile ExchangeOPEB

Postretirement benefit plans other than pensionsPalisades

Palisades nuclear power plant, formerly owned by ConsumersPanhandle

Panhandle Eastern Pipe Line Company, including its subsidiaries
    Trunkline, Pan Gas Storage, Panhandle Storage, and Panhandle
    Holdings, a former wholly owned subsidiary of CMS Gas
    TransmissionParmelia

A business located in Australia comprised of a pipeline,
    processing facilities, and a gas storage facility, a former
    subsidiary of CMS Gas TransmissionPCB

Polychlorinated biphenylPDVSA

Petroleos de Venezuela S.A., a non-affiliated companyPeabody Energy

Peabody Energy Corporation, a non-affiliated companyPension Plan

The trusteed, non-contributory, defined benefit pension plan of
    Panhandle, Consumers and CMS EnergyPowerSmith

A 124 MW natural gas power plant located in Oklahoma, in
    which CMS Generation formerly held a 6.25% limited partner
    ownership interestPSCR

Power supply cost recoveryPUHCA

Public Utility Holding Company ActPURPA

Public Utility Regulatory Policies Act of 1978Quicksilver

Quicksilver Resources, Inc., a non-affiliated company 7




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RAKTL

Ronald A. Katz Technology Licensing L.P., a non-affiliated
    companyRCP

Resource Conservation PlanReserve Margin

The amount of unused available electric capacity at peak demand
    as a percentage of total electric capacityROA

Retail Open Access, which allows electric generation customers
    to choose alternative electric suppliers pursuant to the
    Customer Choice Act.S&P

Standard & Poors Ratings Group, a division of The
    McGraw-Hill Companies, Inc.SEC

U.S. Securities and Exchange CommissionSection 10d(4) Regulatory Asset

Regulatory asset as described in Section 10d(4) of the Customer
    Choice Act, as amendedSecuritization

A financing method authorized by statute and approved by the
    MPSC which allows a utility to sell its right to receive a
    portion of the rate payments received from its customers for the
    repayment of securitization bonds issued by a special purpose
    entity affiliated with such utilitySENECA

Sistema Electrico del Estado Nueva Esparta C.A., a former
    subsidiary of CMS International VenturesSERP

Supplemental Executive Retirement PlanSFAS

Statement of Financial Accounting StandardsSFAS No. 5

SFAS No. 5, Accounting for ContingenciesSFAS No. 13

SFAS No. 13, Accounting for LeasesSFAS No. 71

SFAS No. 71, Accounting for the Effects of Certain Types
    of RegulationSFAS No. 87

SFAS No. 87, Employers Accounting for PensionsSFAS No. 98

SFAS No. 98, Accounting for LeasesSFAS No. 106

SFAS No. 106, Employers Accounting for
    Postretirement Benefits Other Than PensionsSFAS No. 109

SFAS No. 109, Accounting for Income TaxesSFAS No. 132(R)

SFAS No. 132 (revised 2003), Employers Disclosures
    about Pensions and Other Postretirement BenefitsSFAS No. 133

SFAS No. 133, Accounting for Derivative Instruments and
    Hedging Activities, as amended and interpretedSFAS No. 143

SFAS No. 143, Accounting for Asset Retirement
    ObligationsSFAS No. 144

SFAS No. 144, Accounting for the Impairment or Disposal of
    Long-Lived AssetsSFAS No. 157

SFAS No. 157, Fair Value MeasurementSFAS No. 158

SFAS No. 158, Employers Accounting for Defined
    Benefit Pension and Other Postretirement Plans  an
    amendment of FASB Statements No. 87, 88, 106, and 132(R)SFAS No. 159

SFAS No. 159, The Fair Value Option for Financial Assets
    and Financial Liabilities, Including an amendment to FASB
    Statement No. 115SFAS No. 160

SFAS No. 160, Noncontrolling Interests in Consolidated
    Financial Statements - an amendment of ARB No. 51Shuweihat

A power and desalination plant located in the United Arab
    Emirates, in which CMS Generation formerly owned a
    20 percent interestSLAP

Scudder Latin American Power FundSRLY

Separate Return Limitation Year 8




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Stranded Costs

Costs incurred by utilities in order to serve their customers in
    a regulated monopoly environment, which may not be recoverable
    in a competitive environment because of customers leaving their
    systems and ceasing to pay for their costs.  These costs could
    include owned and purchased generation and regulatory assets.Superfund

Comprehensive Environmental Response, Compensation and Liability
    ActTakoradi

A 200 MW open-cycle combustion turbine crude oil power
    plant located in Ghana, in which CMS Generation formerly owned a
    90 percent interestTAQA

Abu Dhabi National Energy Company, a subsidiary of Abu Dhabi
    Water and Electricity Authority, a non-affiliated companyTaweelah

Al Taweelah A2, a power and desalination plant of Emirates CMS
    Power Company located in the United Arab Emirates, in which CMS
    Generation formerly held a 40 percent interestTGN

A natural gas transportation and pipeline business located in
    Argentina, in which CMS Gas Transmission owns a
    23.54 percent interestTRAC

Terminal Rental Adjustment Clause, a provision of a leasing
    agreement which permits or requires the rental price to be
    adjusted upward or downward by reference to the amount realized
    by the lessor under the agreement upon sale or other disposition
    of formerly leased propertyTrunkline

CMS Trunkline Gas Company, LLC, formerly a subsidiary of CMS
    Panhandle Holdings, LLCTrust Preferred Securities

Securities representing an undivided beneficial interest in the
    assets of statutory business trusts, the interests of which have
    a preference with respect to certain trust distributions over
    the interests of either CMS Energy or Consumers, as applicable,
    as owner of the common beneficial interests of the trustsTSR

Total shareholder returnTTT

Gas title transfer tracking fees and servicesUnion

Utility Workers Union of America, AFL-CIOVEBA

VEBA employees beneficiary association trusts accounts
    established to set aside specifically employer contributed
    assets to pay for future expenses of the OPEB planZeeland

A 935 MW gas-fired power plant located in Zeeland, Michigan  9




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10




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PART I ITEM 1. BUSINESS  GENERAL
  CMS
    Energy
  and/or
    Consumers
        Consumers Properties 
    General:
  BUSINESS
    SEGMENTS
  CMS Energy
    Financial Information
    Consumers
    Financial Information
   11




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##### 



Consumers
    Electric Utility
  Electric
    Utility Operations
      2006-07
   12




---



##### 



Electric
    Utility Properties
  Generation:
  2007


2007 NetSummer Net


GenerationSize and Year

Demonstrated


(MillionsName and Location (Michigan)

Entering Service

Capability (MW)


of kWh)Coal GenerationJ H Campbell 1 & 2  West Olive

2 Units, 1962-1967


615



4,320J H Campbell 3  West Olive

1 Unit, 1980


765
(a)


3,540D E Karn  Essexville

2 Units, 1959-1961


515



3,663B C Cobb  Muskegon

2 Units, 1956-1957


312



2,151J R Whiting  Erie

3 Units, 1952-1953


328



2,394J C Weadock  Essexville

2 Units, 1955-1958


306



1,835Total coal generation




2,841



17,903Oil/Gas GenerationB C Cobb  Muskegon

3 Units, 1999-2000(b)


183



7D E Karn  Essexville

2 Units, 1975-1977


1,276



215Zeeland  Zeeland

1 Unit, 2002







(c)Total oil/gas generation




1,459



222HydroelectricConventional Hydro Generation

13 Plants, 1906-1949


73



416Ludington Pumped Storage

6 Units, 1973


955
(d)


(478
)(e)Total hydroelectric




1,028



(62
)Nuclear GenerationPalisades  South Haven

1 Unit, 1971






1,781
(f)Gas/Oil Combustion TurbineVarious Plants

7 Plants, 1966-1971


345



19Zeeland  Zeeland

2 Units, 2001







(c)Total gas/Oil Combustion Turbine




345



19Total owned generation




5,673



19,863Purchased and Interchange PowerCapacity




3,627
(g)Total




9,300     (a)
    Represents Consumers share of the capacity of the J H
    Campbell 3 unit, net of the 6.69 percent ownership
    interest of the Michigan Public Power Agency and Wolverine Power
    Supply Cooperative, Inc.  (b)
    
    Cobb 1-3 are retired coal-fired units that were converted to
    gas-fired. Units were placed back into service in the years
    indicated.(c)
    
    Zeeland was purchased on December 21, 2007. It consists of
    two simple cycle combustion turbines and a combined cycle plant
    consisting of two combustion turbines and one steam turbine. The
    plant was not used by Consumers during 2007.(d)
    
    Represents Consumers 51 percent share of the capacity
    of Ludington. Detroit Edison owns 49 percent.(e)
    
    Represents Consumers share of net pumped storage
    generation. This facility electrically pumps water during
    off-peak hours for storage to generate electricity later during
    peak-demand hours.(f)
    
    Palisades was sold in April 2007 and Consumers entered into a
    15-year
    power purchase agreement for all of the capacity and energy
    produced by Palisades, up to the annual average capacity of
    798 MW. 13




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##### 



(g)
    
    Includes 1,240 MW of purchased contract capacity from the
    MCV Facility and 778 MW of purchased contract capacity from
    the Palisades plant.  Distribution:
  
    390 miles of high-voltage distribution radial lines
    operating at 120 kilovolts and above;
    4,216 miles of high-voltage distribution overhead lines
    operating at 23 kilovolts and 46 kilovolts;
    17 subsurface miles of high-voltage distribution underground
    lines operating at 23 kilovolts and 46 kilovolts;
    55,656 miles of electric distribution overhead lines;
    9,780 miles of underground distribution lines; and
    substations having an aggregate transformer capacity of
    23,143,920 kilovoltamperes.    Fuel Supply:
  Millions of kWhPower Generated

2007


2006


2005


2004


2003Coal


17,903



17,744



19,711



18,810



20,091Nuclear


1,781



5,904



6,636



5,346



6,151Oil


112



48



225



193



242Gas


129



161



356



38



129Hydro


416



485



387



445



335Net pumped storage


(478
)


(426
)


(516
)


(538
)


(517
)Total net generation


19,863



23,916



26,799



24,294



26,431     Cost per Million BtuFuel Consumed

2007


2006


2005


2004


2003Coal

$
2.04


$
2.09


$
1.78


$
1.43


$
1.33Oil


8.21



8.68



5.98



4.68



3.92Gas


10.29



8.92



9.76



10.07



7.62Nuclear


0.42



0.24



0.34



0.33



0.34All Fuels(a)


2.07



1.72



1.64



1.26



1.16     (a)
    
    Weighted average fuel costs.  50-day
     14




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Consumers
    Gas Utility
  Gas
    Utility Operations
      Gas Utility Properties:
  
    26,404 miles of distribution mains;
    1,669 miles of transmission lines;
    7 compressor stations with a total of 162,000 installed
    horsepower; and
    15 gas storage fields with an aggregate storage capacity of 308
    bcf and a working storage capacity of 143 bcf.  Gas Supply:
    Volume(dekatherms/day)


ExpirationANR Pipeline Company


50,000



March



2017Great Lakes Gas Transmission, L.P.


100,000



March



2011Great Lakes Gas Transmission, L.P.


50,000



March



2017Trunkline Gas Company


290,000



October



2008Trunkline Gas Company (starting 11/01/08)


240,000



October



2012Panhandle Eastern Pipe Line Company


50,000



October



2008Panhandle Eastern Pipe Line Company (starting 4/01/08)


50,000



October



2008Panhandle Eastern Pipe Line Company (starting 4/01/09)


50,000



October



2009Panhandle Eastern Pipe Line Company (starting 4/01/10)


50,000



October



2010Panhandle Eastern Pipe Line Company (starting 4/01/11)


50,000



October



2011Panhandle Eastern Pipe Line Company (starting 4/01/12)


50,000



October



2012Panhandle Eastern Pipe Line Company (starting 11/01/08)


50,000



October



2013Panhandle Eastern Pipe Line Company (starting 4/01/13)


50,000



October



2013Vector Pipeline


50,000



March



2012  15




---



##### 



Enterprises
      Independent Power
    Production
    Independent Power Production Properties:
    Percentage ofGross CapacityUnder Long-TermOwnership Interest


Gross Capacity


ContractLocation

Fuel Type

(%)


(MW)


(%)California

Wood


37.8



36



100Connecticut

Scrap tire


100



31



0Michigan

Coal


50



70



100Michigan

Natural gas


100



710



61Michigan

Natural gas


100



224



0Michigan

Wood


50



40



100Michigan

Wood


50



38



100North Carolina

Wood


50



50



0Total








1,199    16




---



##### 



Natural Gas
    Transmission
        Natural Gas Transmission Properties:
  Energy Resource
    Management
      International
    Energy Distribution
    CMS ENERGY AND
    CONSUMERS REGULATION
    Michigan Public
    Service Commission
     17




---



##### 



Rate Proceedings:
    MPSC Regulation and Michigan Legislation:
    Federal Energy
    Regulatory Commission
          Other
    Regulation
   18




---



##### 



CMS ENERGY AND
    CONSUMERS ENVIRONMENTAL COMPLIANCE
                   19




---



##### 



CMS ENERGY AND
    CONSUMERS COMPETITION
  Electric
    Competition
        
    industrial customers relocating all or a portion of their
    production capacity outside Consumers service territory
    for economic reasons;
    municipalities owning or operating competing electric delivery
    systems;
    customer self-generation; and
    adjacent utilities that extend lines to customers in contiguous
    service territories.          Gas
    Competition
    INSURANCE
     20




---



##### 



EMPLOYEES
  CMS
    Energy
    Consumers
    CMS ENERGY
    EXECUTIVE OFFICERS (as of February 1, 2008)
  Name

Age

Position

PeriodDavid W. Joos

54

President and CEO of CMS Energy

2004-PresentCEO of Consumers

2004-PresentChairman of the Board, CEO of Enterprises

2003-PresentPresident, Chief Operating Officer of CMS Energy

2001-2004President, Chief Operating Officer of Consumers

2001-2004President, Chief Operating Officer of Enterprises

2001-2003Director of CMS Energy

2001-PresentDirector of Consumers

2001-PresentDirector of Enterprises

2000-PresentThomas J. Webb

55

Executive Vice President, CFO of CMS Energy

2002-PresentExecutive Vice President, CFO of Consumers

2002-PresentExecutive Vice President, CFO of Enterprises

2002-PresentExecutive Vice President, CFO of CMS Generation

2006-5/2007Director of Enterprises

2002-PresentDirector of CMS Generation

2003-5/2007James E. Brunner*

55

Senior Vice President and General Counsel of CMS Energy

11/2006-PresentSenior Vice President and General Counsel of Consumers

11/2006-PresentSenior Vice President and General Counsel of Enterprises

11/2007-PresentSenior Vice President of Enterprises

2006-11/2007Senior Vice President of CMS Generation

2006-5/2007Senior Vice President, General Counsel and Chief Compliance
    Officer of CMS Energy

5/2006-11/2006Senior Vice President, General Counsel and Chief Compliance
    Officer of Consumers

5/2006-11/2006Senior Vice President, General Counsel and Interim Chief
    Compliance Officer of Consumers

2/2006-5/2006Senior Vice President and General Counsel of CMS Energy

2/2006-5/2006Senior Vice President and General Counsel of Consumers

2/2006-5/2006Vice President and General Counsel of Consumers

7/2004-2/2006Vice President of Consumers

2004Director of Enterprises

2006-Present 21




---



##### 



Name

Age

Position

PeriodJohn M. Butler **

43

Senior Vice President of CMS Energy

2006-PresentSenior Vice President of Consumers

2006-PresentSenior Vice President of Enterprises

2006-PresentSenior Vice President of CMS Generation

2006-5/2007David G. Mengebier

50

Senior Vice President and Chief Compliance Officer of CMS Energy

11/2006-PresentSenior Vice President and Chief Compliance Officer of Consumers

11/2006-PresentSenior Vice President of Enterprises

2003-PresentSenior Vice President of CMS Energy

2001-11/2006Senior Vice President of Consumers

2001-11/2006Thomas W. Elward

59

President, Chief Operating Officer of Enterprises

2003-PresentPresident, CEO of CMS Generation

2002-5/2007Senior Vice President of Enterprises

2002-2003Director of Enterprises

2003-PresentDirector of CMS Generation

2002-5/2007John G. Russell

50

President and Chief Operating Officer of Consumers

2004-PresentExecutive Vice President and President  Electric
    & Gas of Consumers

7/2004-10/2004Executive Vice President, President and CEO  Electric
    of Consumers

2001-2004Glenn P. Barba

42

Vice President, Controller and Chief Accounting Officer of CMS
    Energy

2003-PresentVice President, Controller and Chief Accounting Officer of
    Consumers

2003-PresentVice President, Chief Accounting Officer and Controller of
    Enterprises

11/2007-PresentVice President and Chief Accounting Officer of Enterprises

2003-11/2007Vice President and Controller of Consumers

2002-2003     *
    
    From 1993 until July 2004, Mr. Brunner was Assistant
    General Counsel of Consumers.**
    
    From 2002 until 2004, Mr. Butler was Global Compensation
    and Benefits Resource Center Director at Dow and from 2004 until
    June 2006, Mr. Butler was Human Resources Director,
    Manufacturing and Engineering at Dow.      CONSUMERS
    EXECUTIVE OFFICERS (as of February 1, 2008)
  Name

Age

Position

PeriodDavid W. Joos

54

President and CEO of CMS Energy

2004-PresentCEO of Consumers

2004-PresentChairman of the Board, CEO of Enterprises

2003-PresentPresident, Chief Operating Officer of CMS Energy

2001-2004President, Chief Operating Officer of Consumers

2001-2004President, Chief Operating Officer of Enterprises

2001-2003Director of CMS Energy

2001-PresentDirector of Consumers

2001-PresentDirector of Enterprises

2000-Present 22




---



##### 



Name

Age

Position

PeriodThomas J. Webb

55

Executive Vice President, CFO of CMS Energy

2002-PresentExecutive Vice President, CFO of Consumers

2002-PresentExecutive Vice President, CFO of Enterprises

2002-PresentExecutive Vice President, CFO of CMS Generation

2006-5/2007Director of Enterprises

2002-PresentDirector of CMS Generation

2003-5/2007James E. Brunner*

55

Senior Vice President and General Counsel of CMS Energy

11/2006-PresentSenior Vice President and General Counsel of Consumers

11/2006-PresentSenior Vice President and General Counsel of Enterprises

11/2007-PresentSenior Vice President of Enterprises

2006-11/2007Senior Vice President of CMS Generation

2006-5/2007Senior Vice President, General Counsel and Chief Compliance
    Officer of CMS Energy

5/2006-11/2006Senior Vice President, General Counsel and Chief Compliance
    Officer of Consumers

5/2006-11/2006Senior Vice President, General Counsel and Interim Chief
    Compliance Officer of Consumers

2/2006-5/2006Senior Vice President and General Counsel of CMS Energy

2/2006-5/2006Senior Vice President and General Counsel of Consumers

2/2006-5/2006Vice President and General Counsel of Consumers

7/2004-2/2006Vice President of Consumers

2004Director of Enterprises

2006-PresentJohn M. Butler **

43

Senior Vice President of CMS Energy

2006-PresentSenior Vice President of Consumers

2006-PresentSenior Vice President of Enterprises

2006-PresentSenior Vice President of CMS Generation

2006-5/2007David G. Mengebier

50

Senior Vice President and Chief Compliance Officer of CMS Energy

11/2006-PresentSenior Vice President and Chief Compliance Officer of Consumers

11/2006-PresentSenior Vice President of Enterprises

2003-PresentSenior Vice President of CMS Energy

2001-11/2006Senior Vice President of Consumers

2001-11/2006John G. Russell

50

President and Chief Operating Officer of Consumers

2004-PresentExecutive Vice President and President  Electric
    & Gas of Consumers

7/2004-10/2004Executive Vice President, President and CEO  Electric
    of Consumers

2001-2004William E. Garrity

59

Senior Vice President of Consumers

2005-PresentVice President of Consumers

1999-2005Frank Johnson

59

Senior Vice President of Consumers

2001-PresentPaul N. Preketes

58

Senior Vice President of Consumers

1999-Present 23




---



##### 



Name

Age

Position

PeriodGlenn P. Barba

42

Vice President, Controller and Chief Accounting Officer of CMS
    Energy

2003-PresentVice President, Controller and Chief Accounting Officer of
    Consumers

2003-PresentVice President, Chief Accounting Officer and Controller of
    Enterprises

11/2007-PresentVice President and Chief Accounting Officer of Enterprises

2003-11/2007Vice President and Controller of Consumers

2002-2003     *
    
    From 1993 until July 2004, Mr. Brunner was Assistant
    General Counsel of Consumers.**
    
    From 2002 until 2004, Mr. Butler was Global Compensation
    and Benefits Resource Center Director at Dow and from 2004 until
    June 2006, Mr. Butler was Human Resources Director,
    Manufacturing and Engineering at Dow.      AVAILABLE
    INFORMATION
  Form 10-K, Form 10-Q, Form 8-K,
  
    Corporate Governance Principles;
    Codes of Conduct (Code of Business Conduct and Statement of
    Ethics);
    Board committee charters (including the Audit Committee, the
    Compensation and Human Resources Committee, the Finance
    Committee and the Governance and Public Responsibility
    Committee); and
    Articles of Incorporation (and amendments) and Bylaws.    1-800-SEC-0330. http://www.sec.gov.
 24




---



##### 



ITEM 1A. RISK
    FACTORS    Risks
    Related to CMS Energy
  CMS
    Energy depends on dividends from its subsidiaries to meet its
    debt service obligations.
    CMS
    Energy has substantial indebtedness that could limit its
    financial flexibility and hence its ability to meet its debt
    service obligations.
      
    a significant portion of its cash flow from operations will be
    dedicated to the payment of principal and interest on its
    indebtedness and will not be available for other purposes;
    covenants contained in its existing debt arrangements require it
    to meet certain financial tests, which may affect its
    flexibility in planning for, and reacting to, changes in its
    business;
    its ability to obtain additional financing for working capital,
    capital expenditures, acquisitions and general corporate and
    other purposes may be limited;
    it may be at a competitive disadvantage to its competitors that
    are less leveraged; and
    its vulnerability to adverse economic and industry conditions
    may increase.   25




---



##### 



CMS
    Energy cannot predict the outcome of claims regarding its
    participation in the development of Bay Harbor or other
    litigation in which substantial monetary claims are
    involved.
             26




---



##### 



CMS
    Energy retains contingent liabilities in connection with its
    asset sales.
    
    retain specified preexisting liabilities such as for taxes,
    pensions, or environmental conditions;
    indemnify the buyers against specified risks, including the
    inaccuracy of representations and warranties it makes; and
    make payments to the buyers depending on the outcome of
    post-closing adjustments, litigation, audits or other reviews.    Risks
    Related to CMS Energy and Consumers
  CMS
    Energy and Consumers have financing needs and they may be unable
    to obtain bank financing or access the capital
    markets.
    and/or and/or
 27




---



##### 



Regulatory
    changes and other developments have resulted and could continue
    to result in increased competition in the domestic energy
    business. Generally, increased competition threatens market
    share in certain segments of CMS Energys business and can
    reduce its and Consumers profitability.
    Electric
    industry regulation could adversely affect CMS Energys and
    Consumers business, including their ability to recover
    costs from their customers.
      CMS
    Energy and Consumers could incur significant capital
    expenditures to comply with environmental standards and face
    difficulty in recovering these costs on a current
    basis.
       28




---



##### 



and/or and/or
  Market
    performance and other changes may decrease the value of benefit
    plan assets, which then could require significant
    funding.
    Periodic
    reviews of the values of CMS Energys and Consumers
    assets could result in accounting charges.
    CMS
    Energy and Consumers may be adversely affected by regulatory
    investigations regarding round-trip trading by CMS
    MST as well as civil lawsuits regarding pricing information that
    CMS MST and CMS Field Services provided to market
    publications.
   29




---



##### 



cease-and-desist
    CMS
    Energy and Consumers may be adversely affected by regulatory
    investigations and civil lawsuits regarding pricing information
    that CMS MST and CMS Field Services provided to market
    publications.
        CMS
    Energys and Consumers revenues and results of
    operations are subject to risks that are beyond their control,
    including but not limited to future terrorist attacks or related
    acts of war.
    Consumers
    may not prevail in the exercise of its regulatory-out rights
    under the MCV PPA.
  35-year
   30




---



##### 



Consumers
    energy risk management strategies may not be effective in
    managing fuel and electricity pricing risks, which could result
    in unanticipated liabilities to Consumers or increased
    volatility of its earnings.
      Changes
    in taxation as well as inherent difficulty in quantifying
    potential tax effects of business decisions could negatively
    impact CMS Energys and Consumers results of
    operations.
  and/or
  Consumers
    is exposed to risks related to general economic conditions in
    its service territories.
    CMS
    Energys and Consumers energy sales and operations
    are impacted by seasonal factors and varying weather conditions
    from year to year.
   31




---



##### 



Unplanned
    power plant outages may be costly for Consumers.
    Failure
    to implement successfully new processes and information systems
    could interrupt our operations.
    Consumers
    may not be able to obtain an adequate supply of coal, which
    could limit its ability to operate its facilities.
   ITEM 1B.
    UNRESOLVED STAFF COMMENTS   ITEM 2.
    PROPERTIES    
    BUSINESS  GENERAL  Consumers 
    Consumers Properties  General;
    BUSINESS  BUSINESS SEGMENTS  Consumers
    Electric Utility  Electric Utility Properties;
    BUSINESS  BUSINESS SEGMENTS  Consumers Gas
    Utility  Gas Utility Properties;
    BUSINESS  BUSINESS SEGMENTS  Independent
    Power Production  Independent Power Production
    Properties; and
    BUSINESS  BUSINESS SEGMENTS  Natural Gas
    Transmission  Natural Gas Transmission Properties. ITEM 3. LEGAL
    PROCEEDINGS   32




---



##### 



CMS
    Energy
  SEC
    REQUEST
    GAS INDEX PRICE
    REPORTING LITIGATION
        non-class
 33




---



##### 



34




---



##### 



ROUND-TRIP
    TRADING INVESTIGATIONS
    cease-and-desist
  QUICKSILVER
    RESOURCES, INC.
   35




---



##### 



Consumers
    CMS Energy and
    Consumers
  SECURITIES
    CLASS ACTION SETTLEMENT
     36




---



##### 



ENVIRONMENTAL
    MATTERS
   ITEM 4.
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  CMS
    Energy
    Consumers
   37




---



##### 



PART II ITEM 5. MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES  CMS
    Energy
    Consumers
    Issuer
    Repurchases of Equity Securities
    Total Number of


Maximum Number ofShares Purchased


Shares That May YetTotal Number





as Part of Publicly


Be Purchased Underof Shares


Average Price


Announced


Publicly AnnouncedPeriod

Purchased*


Paid per Share


Plans or Programs


Plans or ProgramsOctober 1, 2007 to October 31, 2007














November 1, 2007 to November 30, 2007


1,062


$
16.97







December 1, 2007 to December 31, 2007


1,233


$
17.09







     *
    
    We repurchase certain restricted shares upon vesting under the
    Performance Incentive Stock Plan (Plan) from
    participants in the Plan, equal to our minimum statutory income
    tax withholding obligation. Shares repurchased have a value
    based on the market price on the vesting date. ITEM 6.
    SELECTED FINANCIAL DATA  CMS
    Energy
    Consumers
   38




---



##### 



ITEM 7.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CMS
    Energy
    Consumers
   ITEM 7A.
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  CMS
    Energy
    Consumers
   39




---



##### 



ITEM 8.
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA    PageIndex to Financial Statements:CMS Energy CorporationSelected Financial Information

CMS - 2Managements Discussion and Analysis Forward-Looking
    Statements and Information

CMS - 3Executive Overview

CMS - 4Results of Operations

CMS - 6Critical Accounting Policies

CMS - 15Capital Resources and Liquidity

CMS - 21Outlook

CMS - 25Implementation of New Accounting Standards

CMS - 32New Accounting Standards Not Yet Effective

CMS - 33Consolidated Financial StatementsConsolidated Statements of Income (Loss)

CMS - 35Consolidated Statements of Cash Flows

CMS - 37Consolidated Balance Sheets

CMS - 39Consolidated Statements of Common Stockholders Equity

CMS - 41Notes to Consolidated Financial Statements:1. Corporate Structure and Accounting Policies

CMS - 442. Asset Sales, Discontinued Operations and
    Impairment Charges

CMS - 513. Contingencies

CMS - 564. Financings and Capitalization

CMS - 685. Earnings Per Share

CMS - 726. Financial and Derivative Instruments

CMS - 737. Retirement Benefits

CMS - 778. Asset Retirement Obligations

CMS - 839. Income Taxes

CMS - 8510. Stock Based Compensation

CMS - 8811. Leases

CMS - 9012. Property, Plant, and Equipment

CMS - 9213. Equity Method Investments

CMS - 9314. Jointly Owned Regulated Utility Facilities

CMS - 9615. Reportable Segments

CMS - 9616. Consolidation of Variable Interest Entities

CMS - 9917. Quarterly Financial and Common Stock Information
    (Unaudited)

CMS - 99Reports of Independent Registered Public Accounting Firms

CMS - 101  40




---



##### 



PageConsumers Energy CompanySelected Financial Information

CE - 2Managements Discussion and AnalysisForward-Looking Statements and Information

CE - 3Executive Overview

CE - 4Results of Operations

CE - 6Critical Accounting Policies

CE - 12Capital Resources and Liquidity

CE - 16Outlook

CE - 20Implementation of New Accounting Standards

CE - 26New Accounting Standards Not Yet Effective

CE - 27Consolidated Financial StatementsConsolidated Statements of Income (Loss)

CE - 29Consolidated Statements of Cash Flows

CE - 30Consolidated Balance Sheets

CE - 32Consolidated Statements of Common Stockholders Equity

CE - 34Notes to Consolidated Financial Statements:1. Corporate Structure and Accounting Policies

CE - 372. Asset Sales and Impairment Charges

CE - 433. Contingencies

CE - 454. Financings and Capitalization

CE - 535. Financial and Derivative Instruments

CE - 556. Retirement Benefits

CE - 577. Asset Retirement Obligations

CE - 638. Income Taxes

CE - 659. Stock Based Compensation

CE - 6810. Leases

CE - 7011. Property, Plant, and Equipment

CE - 7212. Jointly Owned Regulated Utility Facilities

CE - 7313. Reportable Segments

CE - 7314. Quarterly Financial and Common Stock Information
    (Unaudited)

CE - 75Reports of Independent Registered Public Accounting Firms

CE - 76  41




---



##### 



2007 Consolidated
    Financial Statements
  CMS-1




---



##### 



CMS Energy
    Corporation
  SELECTED
    FINANCIAL INFORMATION
  2007


2006


2005


2004


2003Operating revenue (in millions)

($

)


6,464



6,126



5,879



5,154



5,232Earnings from equity method investees (in millions)

($

)


40



89



125



115



164Income (loss) from continuing operations (in millions)

($

)


(126
)


(133
)


(141
)


112



Cumulative effect of change in accounting (in millions)

($

)














(2
)


(24
)Income (loss) from discontinued operations (in millions)(a)

($

)


(89
)


54



57



11



(19
)Net income (loss) (in millions)

($

)


(215
)


(79
)


(84
)


121



(43
)Net income (loss) available to common stockholders (in millions)

($

)


(227
)


(90
)


(94
)


110



(44
)Average common shares outstanding (in thousands)






222,644



219,857



211,819



168,553



150,434Net income (loss) from continuing operations per average common
    shareCMS Energy  Basic

($

)


(0.62
)


(0.66
)


(0.71
)


0.59



(0.01
) Diluted

($

)


(0.62
)


(0.66
)


(0.71
)


0.58



(0.01
)Cumulative effect of change in accounting per average common
    shareCMS Energy  Basic

($

)














(0.01
)


(0.16
) Diluted

($

)














(0.01
)


(0.16
)Net income (loss) per average common shareCMS Energy  Basic

($

)


(1.02
)


(0.41
)


(0.44
)


0.65



(0.30
) Diluted

($

)


(1.02
)


(0.41
)


(0.44
)


0.64



(0.30
)Cash provided by (used in) operations (in millions)

($

)


27



686



598



353



(250
)Capital expenditures, excluding acquisitions and capital lease
    additions (in millions)

($

)


1,263



670



593



525



535Total assets (in millions)(b)

($

)


14,196



15,371



16,041



15,872



13,838Long-term debt, excluding current portion (in millions)(b)

($

)


5,385



6,200



6,778



6,414



5,981Long-term debt-related parties, excluding current portion (in
    millions)

($

)


178



178



178



504



684Non-current portion of capital leases and finance lease
    obligations (in millions)

($

)


225



42



308



315



58Total preferred stock (in millions)

($

)


294



305



305



305



305Cash dividends declared per common share

($

)


0.20















Market price of common stock at year-end

($

)


17.38



16.70



14.51



10.45



8.52Book value per common share at year-end

($

)


9.46



10.03



10.53



10.62



9.84Number of employees at year-end (full-time equivalents)






7,898



8,640



8,713



8,660



8,411Electric Utility StatisticsSales (billions of kWh)






39



38



39



38



38Customers (in thousands)






1,799



1,797



1,789



1,772



1,754Average sales rate per kWh


(c
)


8.65



8.46



6.73



6.88



6.91Gas Utility StatisticsSales and transportation deliveries (bcf)






340



309



350



385



380Customers (in thousands)(c)






1,710



1,714



1,708



1,691



1,671Average sales rate per mcf

($

)


10.66



10.44



9.61



8.04



6.72     (a)
    
    Prior year amounts have been reclassified to discontinued
    operations.(b)
    
    Until their sale in November 2006, we were the primary
    beneficiary of the MCV Partnership and the FMLP. As a result, we
    consolidated their assets, liabilities and activities into our
    consolidated financial statements through the date of sale and
    for the years ended December 31, 2005 and 2004. These
    partnerships had third party obligations totaling
    $482 million at December 31, 2005 and
    $582 million at December 31, 2004. Property, plant and
    equipment serving as collateral for these obligations had a
    carrying value of $224 million at December 31, 2005
    and $1.426 billion at December 31, 2004.(c)
    
    Excludes off-system transportation customers. CMS-2




---



##### 



CMS Energy
    Corporation
  Managements
    Discussion and Analysis
    FORWARD-LOOKING
    STATEMENTS AND INFORMATION
  Form 10-K
  
    the price of CMS Energy Common Stock, capital and financial
    market conditions, and the effect of such market conditions on
    the Pension Plan, interest rates, and access to the capital
    markets, including availability of financing to CMS Energy,
    Consumers, or any of their affiliates, and the energy industry,
    market perception of the energy industry, CMS Energy, Consumers,
    or any of their affiliates,
    factors affecting utility and diversified energy operations,
    such as unusual weather conditions, catastrophic weather-related
    damage, unscheduled generation outages, maintenance or repairs,
    environmental incidents, or electric transmission or gas
    pipeline system constraints,
    the impact of any future regulations or laws regarding carbon
    dioxide and other greenhouse gas emissions,
    national, regional, and local economic, competitive, and
    regulatory policies, conditions and developments,
    adverse regulatory or legal decisions, including those related
    to environmental laws and regulations, and potential
    environmental remediation costs associated with such decisions,
    including but not limited to those that may affect Bay Harbor,
    potentially adverse regulatory treatment or failure to receive
    timely regulatory orders concerning a number of significant
    questions currently or potentially before the MPSC, including:  
    recovery of Clean Air Act capital and operating costs and other
    environmental and safety-related expenditures,
    recovery of power supply and natural gas supply costs when fuel
    prices are fluctuating,
    timely recognition in rates of additional equity investments and
    additional operation and maintenance expenses at Consumers,
    adequate and timely recovery of additional electric and gas
    rate-based investments,
    adequate and timely recovery of higher MISO energy and
    transmission costs,
    recovery of Stranded Costs incurred due to customers choosing
    alternative energy suppliers,
    recovery of Palisades plant sale-related costs,
    timely recovery of costs associated with energy efficiency
    investments and any state or federally mandated renewables
    resource standards,
    approval of the Balanced Energy Initiative, and
    authorization of a new clean coal plant, CMS-3




---



##### 




    the effects on our ability to purchase capacity to serve our
    customers and fully recover the cost of these purchases, if the
    owners of the MCV Facility exercise their right to terminate the
    MCV PPA,
    the ability of Consumers to prevail in the exercise of its
    regulatory out rights under the MCV PPA,
    adverse consequences due to the assertion of indemnity or
    warranty claims or future assertion of such claims, with respect
    to previously owned assets and businesses, including claims
    related to attempts by the governments of Equatorial Guinea and
    Morocco to assess taxes on past operations or transactions,
    the ability of Consumers to recover Big Rock decommissioning
    funding shortfalls and nuclear fuel storage costs due to the
    DOEs failure to accept spent nuclear fuel on schedule,
    including the outcome of pending litigation with the DOE,
    federal regulation of electric sales and transmission of
    electricity, including periodic re-examination by federal
    regulators of our market-based sales authorizations in wholesale
    power markets without price restrictions,
    energy markets, including availability of capacity and the
    timing and extent of changes in commodity prices for oil, coal,
    natural gas, natural gas liquids, electricity and certain
    related products due to lower or higher demand, shortages,
    transportation problems, or other developments,
    our ability to collect accounts receivable from our customers,
    earnings volatility resulting from the GAAP requirement that we
    apply mark-to-market accounting on certain energy commodity
    contracts and interest rate swaps,
    the effect on our utility and utility revenues of the direct and
    indirect impacts of the continued economic downturn in Michigan,
    potential disruption or interruption of facilities or operations
    due to accidents, war, or terrorism, and the ability to obtain
    or maintain insurance coverage for such events,
    technological developments in energy production, delivery, and
    usage,
    achievement of capital expenditure and operating expense goals,
    changes in financial or regulatory accounting principles or
    policies,
    changes in tax laws or new IRS interpretations of existing or
    past tax laws,
    changes in federal or state regulations or laws that could have
    an impact on our business,
    the outcome, cost, and other effects of legal or administrative
    proceedings, settlements, investigations, or claims resulting
    from the investigation by the DOJ regarding round-trip trading
    and price reporting,
    disruptions in the normal commercial insurance and surety bond
    markets that may increase costs or reduce traditional insurance
    coverage, particularly terrorism and sabotage insurance,
    performance bonds, and tax exempt debt insurance,
    credit ratings of CMS Energy or Consumers, and
    other business or investment considerations that may be
    disclosed from time to time in CMS Energys or
    Consumers SEC filings, or in other publicly issued written
    documents.   EXECUTIVE
    OVERVIEW   CMS-4




---



##### 




    weather, especially during the normal heating and cooling
    seasons,
    economic conditions, primarily in Michigan,
    regulation and regulatory issues that affect our electric and
    gas utility operations,
    energy commodity prices,
    interest rates, and
    our debt credit rating.                   CMS-5




---



##### 




    continuing investment in our utility business,
    growing earnings while controlling operating costs and parent
    debt, and
    maintaining principles of safe, efficient operations, customer
    value, fair and timely regulation, and consistent financial
    performance.   RESULTS OF
    OPERATIONS  CMS
    Energy Consolidated Results of Operations
  Years Ended December 31

2007


2006


2005In Millions (Except for Per Share Amounts)Net Loss Available to Common Stockholders

$
(227
)

$
(90
)

$
(94
)Basic Loss Per Share

$
(1.02
)

$
(0.41
)

$
(0.44
)Diluted Loss Per Share

$
(1.02
)

$
(0.41
)

$
(0.44
)   Years Ended December 31

2007


2006


Change


2006


2005


ChangeIn MillionsElectric Utility

$
196


$
199


$
(3
)

$
199


$
153


$
46Gas Utility


87



37



50



37



48



(11
)Enterprises


(391
)


(227
)


(164
)


(227
)


(217
)


(10
)Corporate Interest and Other


(30
)


(153
)


123



(153
)


(135
)


(18
)Discontinued Operations


(89
)


54



(143
)


54



57



(3
)Net Loss Available to Common Stockholders

$
(227
)

$
(90
)

$
(137
)

$
(90
)

$
(94
)

$
4    CMS-6




---



##### 



In Millionscosts incurred by CMS ERM due to the
    rescission of a contract with Quicksilver and the termination of
    certain electricity sales agreements,

$
(217
) impact from discontinued operations as losses
    recorded on the disposal of international businesses in 2007
    replaced earnings recorded for these businesses in 2006,


(143
) reduction in earnings from equity method
    investees primarily due to the absence of earnings from
    international businesses sold in 2007,


(32
) additional environmental remediation expenses
    at Bay Harbor,


(29
) additional taxes at our corporate and
    Enterprises segments as the absence of tax benefits associated
    with the resolution of an IRS income tax audit in 2006 more than
    offset the net tax benefits associated with the sale of
    international businesses recorded in 2007,


(16
) absence of a 2006 net charge resulting
    from our agreement to settle shareholder class action lawsuits,


80 absence of activities related to our former
    interest in the MCV Partnership including asset impairments and
    mark-to-market activities,


60 earnings from non-MCV-related mark-to-market
    activity primarily at CMS ERM, as
    mark-to-market
    gains in 2007 replaced losses in 2006,


49 increase in combined net earnings at our gas
    utility and electric utility, primarily due to the positive
    effects of MPSC gas rate orders and increased weather-related
    deliveries,


47 decrease in non-MCV-related asset impairment
    charges, net of insurance reimbursement, and


38 additional increase at Enterprises and
    corporate primarily due to gains on the sale of international
    businesses in 2007, a reduction in interest expense, and
    increased interest income.


26Total change

$
(137
)    CMS-7




---



##### 



In Millions

decrease in asset impairment charges as the $385 million
    impairment related to the MCV Partnership recorded in 2005
    exceeded the $169 million impairment related to GasAtacama
    recorded in 2006,

$
216

increase from Enterprises due to favorable arbitration and
    property tax awards,


48

increase in earnings from our electric utility primarily due to
    an increase in revenue from an electric rate order, the return
    to full service-rates of customers previously using alternative
    energy suppliers, and the expiration of rate caps in December
    2005 partially offset by higher operating expense and lower
    deliveries due to milder weather,


46

decrease in Enterprise and corporate interest and other expenses
    primarily due to an insurance reimbursement received for
    previously incurred legal expenses, and a reduction in debt
    retirement charges and other expenses,


26

lower incremental environmental remediation expenses recorded in
    2006 related to our involvement in Bay Harbor,


20

decrease in earnings from mark-to-market valuation adjustments
    primarily at the MCV Partnership and CMS ERM as losses recorded
    in 2006 replaced gains recorded in 2005,


(203
)

net charge resulting from our agreement to settle shareholder
    class action lawsuits,


(80
)

net loss on the sale of our investment in the MCV Partnership
    including the negative impact of the associated impairment
    charge recorded in 2006 and the positive impact of the
    recognition of certain derivative instruments,


(41
)

decrease in various corporate and Enterprises tax benefits as
    the absence of tax benefits recorded in 2005 related to the
    American Jobs Creation Act more than offset benefits recorded in
    2006, primarily related to the restoration and utilization of
    income tax credits due to the resolution of an IRS income tax
    audit,


(14
)

decrease in earnings from our gas utility primarily due to a
    reduction in deliveries resulting from increased customer
    conservation efforts and warmer weather in 2006 partially offset
    by other gas revenue associated with pipeline capacity
    optimization and a reduction in operation and maintenance
    expenses, and


(11
)

reduced earnings from discontinued operations as the positive
    impact of an arbitration award and a reduction of contingent
    liabilities recorded in 2005 exceeded income recorded in 2006
    from the favorable resolution of certain accrued liabilities.


(3
)Total change

$
4  CMS-8




---



##### 



Electric
    Utility Results of Operations
  Years Ended December 31

2007


2006


Change


2006


2005


ChangeIn MillionsNet income

$
196


$
199


$
(3
)

$
199


$
153


$
46Reasons for the change:Electric deliveries









$
18










$
193Surcharge revenue










6











61Palisades revenue to PSCR










(136
)










Power supply costs and related revenue










(17
)










57Other operating expenses, other income, and non-commodity revenue










159











(236
)Regulatory return on capital expenditures










5











22General taxes










(15
)










(7
)Interest charges










(18
)










(34
)Income taxes










(5
)










(10
)Total change









$
(3
)









$
46   Electric deliveries:
    Surcharge Revenue:
    Palisades Revenue to PSCR:
  Power Supply Costs and Related Revenue:
   CMS-9




---



##### 



Other Operating Expenses, Other Income, and Non-Commodity
    Revenue:
        Regulatory Return on Capital Expenditures:
    General Taxes:
    Interest Charges:
    Income Taxes:
   CMS-10




---



##### 



Gas
    Utility Results of Operations
  Years Ended December 31

2007


2006


Change


2006


2005


ChangeIn MillionsNet income

$
87


$
37


$
50


$
37


$
48


$
(11
)Reasons for the change:Gas deliveries









$
10










$
(61
)Gas rate increase










81











14Gas wholesale and retail services, other gas revenues, and other
    income










14











24Other operating expenses










(19
)










7General taxes and depreciation










(11
)










(10
)Interest charges










4











(6
)Income taxes










(29
)










21Total change









$
50










$
(11
)   Gas Deliveries:
    Gas Rate Increase:
    Gas Wholesale and Retail Services, Other Gas Revenues, and
    Other Income:
    Other Operating Expenses:
    General Taxes and Depreciation:
    Interest Charges:
 CMS-11




---



##### 



Income Taxes:
    Enterprises
    Results of Operations
  Years Ended December 31

2007


2006


Change


2006


2005


ChangeIn MillionsNet loss

$
(391
)

$
(227
)

$
(164
)

$
(227
)

$
(217
)

$
(10
)Reasons for the change:Operating revenues









$
(9
)









$
(253
)Cost of gas and purchased power










36











128Earnings from equity method investees










(48
)










(37
)Gain (loss) on sale of assets, net










21











(6
)Operation and maintenance










(7
)










19Electric sales contract termination










(279
)










General taxes, depreciation, and other income, net










20











7Asset impairment charges, net of insurance reimbursement










29











(216
)Environmental remediation










(35
)










31Fixed charges










14











(9
)Minority interest










(7
)










(2
)Income taxes










41











103The MCV Partnership










60











225Total change









$
(164
)









$
(10
)   Operating Revenues:
   CMS-12




---



##### 



Cost of Gas and Purchased Power:
    Earnings from Equity Method Investees:
    Gain (Loss) on Sale of Assets, Net:
      Operation and Maintenance:
    Electric Sales Contract Termination:
  General Taxes, Depreciation, and Other Income,
    Net:
   CMS-13




---



##### 



Asset Impairment Charges, Net of Insurance
    Reimbursement:
      Environmental Remediation:
  Fixed Charges:
    Minority Interest:
    Income Taxes:
    The MCV Partnership:
   CMS-14




---



##### 



Corporate
    Interest and Other Net Expenses
  Years Ended December 31

2007

2006

Change

2006

2005

ChangeIn MillionsNet loss

$
(30
)

$
(153
)

$
123


$
(153
)

$
(135
)

$
(18
)       Discontinued Operations:
   CRITICAL
    ACCOUNTING POLICIES    Use
    of Estimates and Assumptions
    Contingencies:
  Income Taxes:
 CMS-15




---



##### 



Long-Lived Assets and Equity Method Investments:
  
    the nature of the assets,
    projected future economic benefits,
    regulatory and political environments,
    historical and future cash flow and profitability
    measurements, and
    other external market conditions and factors.    Discontinued
    Operations
    Accounting
    for the Effects of Industry Regulation
         CMS-16




---



##### 



Financial
    and Derivative Instruments, Trading Activities, and Market Risk
    Information
  Financial Instruments:
  Derivative Instruments:
      
    they do not have a notional amount (that is, a number of units
    specified in a derivative instrument, such as MWh of electricity
    or bcf of natural gas),
    they qualify for the normal purchases and sales
    exception, or
    there is not an active market for the commodity.    Derivative Contracts Associated with Equity
    Investments
    CMS ERM Contracts:
   CMS-17




---



##### 



Non-Trading


Trading


TotalIn MillionsFair value of contracts outstanding at December 31, 2006

$
31


$
(68
)

$
(37
)Fair value of new contracts when entered into during the
    period(a)






(1
)


(1
)Contracts realized or otherwise settled during the period(b)


(6
)


74



68Other changes in fair value(c)


(43
)


(10
)


(53
)Fair value of contracts outstanding at December 31, 2007

$
(18
)

$
(5
)

$
(23
)     (a)
    
    Reflects premiums paid (received) for new contracts.(b)
    
    CMS ERM terminated certain trading gas contracts during 2007.
    CMS ERM had recorded derivative liabilities, representing
    cumulative unrealized mark-to-market losses, associated with
    these contracts. Therefore, upon the termination of those
    contracts, the fair value of CMS ERMs trading contracts
    increased significantly.(c)
    
    Reflects changes in the fair value of contracts over the period,
    as well as increases or decreases to credit reserves. The fair
    value of CMS ERMs non-trading electric and gas contracts
    decreased significantly during 2007 for two reasons. First, a
    natural gas contract with Quicksilver was prospectively
    rescinded by court action. CMS ERM had recorded a derivative
    asset for this contract, representing cumulative unrealized
    mark-to-market gains. See Note 3, Contingencies,
    Other Contingencies  Quicksilver Resources,
    Inc. for additional details. In addition, CMS ERM recorded
    a derivative liability of $18 million related to the
    amendment of an electricity sales agreement. For additional
    details of this amendment, see the Outlook section
    included in this MD&A.  Fair Value of Non-Trading Contracts at December 31,
    2007Total


Maturity (in years)Source of Fair Value

Fair Value


Less than 1


1 to 3


4 to 5


Greater than 5In MillionsPrices actively quoted

$



$



$



$



$
Prices obtained from external sources or based on models and
    other valuation methods


(18
)


(2
)


(6
)


(5
)


(5
)Total

$
(18
)

$
(2
)

$
(6
)

$
(5
)

$
(5
)   Fair Value of Trading Contracts atDecember 31, 2007Total


Maturity (in years)Source of Fair Value

Fair Value


Less than 1


1 to 3


4 to 5


Greater than 5In MillionsPrices actively quoted

$
1


$



$
1


$



$
Prices obtained from external sources or based on models and
    other valuation methods


(6
)


(6
)










Total

$
(5
)

$
(6
)

$
1


$



$
   Market Risk Information:
 CMS-18




---



##### 



Interest Rate Risk:
    December 31

2007

2006In MillionsVariable-rate financing  before-tax annual earnings
    exposure

$
2


$
4Fixed-rate financing  potential reductionin
    fair value(a)


172



193     (a)
    
    Fair value reduction could only be realized if we transferred
    all of our fixed-rate financing to other creditors.    Commodity Price Risk:
    December 31

2007


2006In MillionsPotential reductionin fair value:Trading contractsElectricity-related contracts


4



2Gas-related contracts


1



  CMS-19




---



##### 



Investment Securities Price Risk:
    December 31

2007

2006In MillionsPotential reductionin fair value of available-for-sale
    equity securities (primarily SERP investments):

$
6


$
6     Pension
    and OPEB
  Pension:
  401(k):
    OPEB:
    
    life expectancies,
    present-value discount rates,
    expected long-term rate of return on plan assets,
    rate of compensation increases, and
    anticipated health care costs.   CMS-20




---



##### 



Expected Costs

Pension Cost


OPEB Cost


ContributionsIn Millions2008

$
106


$
27


$
492009


112



25



492010


116



24



133         Accounting
    for Asset Retirement Obligations
     Capital
    Resources and Liquidity    
    results of operations,
    capital expenditures,
    energy commodity and transportation costs,
    contractual obligations,
    regulatory decisions,
    debt maturities,
    credit ratings,
    working capital needs, and
    collateral requirements.     CMS-21




---



##### 




    our current level of cash and revolving credit facilities,
    our anticipated cash flows from operating and investing
    activities, and
    our ability to access secured and unsecured borrowing capacity
    in the capital markets, if necessary.    Cash
    Position, Investing, and Financing
        Summary
    of Consolidated Statements of Cash Flows:
  2007


2006


2005In MillionsNet cash provided by (used in):Operating activities

$
27


$
686


$
598Investing activities


658



(749
)


(493
)Net cash provided by (used in) operating and investing activities


685



(63
)


105Financing activities


(690
)


(434
)


74Effect of exchange rates on cash


2



1



(1
)Net Increase (Decrease) in Cash and Cash Equivalents

$
(3
)

$
(496
)

$
178   Operating
    Activities:
  2007:
  
    absence, in 2007, of the sale of accounts receivable,
    payments made to fund our Pension Plan and to settle a
    shareholder class action lawsuit,
    refunds to customers of excess Palisades decommissioning
    funds, and
    reduced cash distributions from international investments sold
    during 2007 and other timing differences.    
    a decrease in expenditures for gas inventory, as the milder
    winter in 2006 allowed us to accumulate more gas in our storage
    facilities, and
    the absence of the release of the MCV Partnership gas supplier
    funds on deposit due to the sale of our interest in the MCV
    Partnership in 2006. CMS-22




---



##### 



2006
  
    decreases in accounts receivable primarily due to the collection
    of receivables in 2006 reflecting higher gas prices billed
    during the latter part of 2005 and reduced billings in the
    latter part of 2006 due to milder weather,
    reduced inventory purchases,
    cash proceeds from the sale of excess sulfur dioxide
    allowances, and
    a return of funds formerly held as collateral under certain gas
    hedging arrangements.    Investing
    Activities:
  2007:
  2006:
    Financing
    Activities:
  2007:
  2006:
   CMS-23




---



##### 



Obligations
    and Commitments
  Contractual Obligations:
  Payments DueLess Than


One to


Three to


More ThanContractual Obligations at December 31, 2007

Total


One Year


Three Years


Five Years


Five YearsIn MillionsLong-term debt(a)

$
6,077


$
542


$
1,078


$
1,146


$
3,311Long-term debt  related parties(a)


178















178Interest payments on long-term debt(b)


2,736



330



593



457



1,356Capital and finance leases(c)


255



30



48



44



133Interest payments on capital and finance leases(d)


139



14



27



24



74Operating leases(e)


207



26



45



42



94Purchase obligations(f)


21,286



2,502



2,897



2,275



13,612Total contractual obligations

$
30,878


$
3,444


$
4,688


$
3,988


$
18,758     (a)
    
    Principal amounts due on outstanding debt obligations, current
    and long-term, at December 31, 2007. For additional details
    on long-term debt, see Note 4, Financings and
    Capitalization.(b)
    
    Currently scheduled interest payments on both variable and fixed
    rate long-term debt and long-term debt  related
    parties, current and long-term. Variable interest payments are
    based on contractual rates in effect at December 31, 2007.(c)
    
    Principal portion of lease payments under our capital and
    finance leases, comprised mainly of leased service vehicles,
    leased office furniture, and certain power purchase agreements.(d)
    
    Imputed interest on the capital leases.(e)
    
    Minimum noncancelable lease payments under our leases of
    railroad cars, certain vehicles, and miscellaneous office
    buildings and equipment, which are accounted for as operating
    leases.(f)
    
    Long-term contracts for purchase of commodities and services.
    These obligations include operating contracts used to assure
    adequate supply with generating facilities that meet PURPA
    requirements. These commodities and services include:  
    natural gas and associated transportation,
    electricity, and
    coal and associated transportation.    Revolving Credit Facilities:
  Off-Balance Sheet Arrangements:
 CMS-24




---



##### 



.
  Sale of Accounts Receivable:
  Capital Expenditures:
  Years Ending December 31

2008


2009


2010In MillionsElectric utility operations(a)(b)

$
684


$
717


$
783Gas utility operations(b)


234



263



232Enterprises


28



55



26Total

$
946


$
1,035


$
1,041     (a)
    
    These amounts include estimates for capital expenditures that
    may be required by revisions to the Clean Air Acts
    national air quality standards or potential renewable energy
    programs.(b)
    
    These amounts include estimates for capital expenditures related
    to information technology projects, facility improvements, and
    vehicle leasing. OUTLOOK  Corporate
    Outlook
      ELECTRIC UTILITY
    BUSINESS OUTLOOK
  Growth:
    
    energy conservation measures, CMS-25




---



##### 




    fluctuations in weather conditions, and
    changes in economic conditions, including utilization and
    expansion or contraction of manufacturing facilities.  Electric Customer Revenue Outlook:
  Electric Reserve Margin:
    Electric Transmission Expenses:
    21st Century Electric Energy Plan:
  Balanced Energy Initiative:
     CMS-26




---



##### 



Proposed Energy Legislation:
  Power Plant Purchase:
  ELECTRIC UTILITY
    BUSINESS UNCERTAINTIES
    Electric Environmental Estimates:
  Clean Air Act:
  Clean Air Interstate Rule:
  
    operating our selective catalytic reduction control technology
    units throughout the year,
    completing the installation of a fourth selective catalytic
    reduction control unit,
    installing low nitrogen oxides burners, and
    purchasing emission allowances.    
    construction commodity prices, especially construction material
    and labor,
    project completion schedules and spending plans,
    cost escalation factor used to estimate future years costs
    of 3.2 percent, and
    an AFUDC capitalization rate of 7.9 percent.   CMS-27




---



##### 



State and Federal Mercury Air Rules:
      Phase I

Phase IIProposed State Mercury Rule

30% reduction by 2010

90% reduction by 2015   Routine Maintenance Classification:
  Greenhouse Gases:
    Water:
   CMS-28




---



##### 



Electric ROA:
    Electric Rate Case:
    The MCV PPA: 35-year
      Sale of Nuclear Assets:
   CMS-29




---



##### 



CMS-29.1




---



##### 



15-year
  GAS UTILITY
    BUSINESS OUTLOOK
  Growth:
  
    fluctuations in weather conditions,
    use by independent power producers,
    availability of renewable energy sources,
    changes in gas commodity prices,
    Michigan economic conditions,
    the price of competing energy sources or fuels,
    gas consumption per customer, and
    improvements in gas appliance efficiency.  GAS UTILITY
    BUSINESS UNCERTAINTIES
    Gas Environmental Estimates:
  Gas Cost Recovery:
  Gas Depreciation:
    2007 Gas Rate Case:
 CMS-30




---



##### 



2008 Gas Rate Case:
  ENTERPRISES
    OUTLOOK
      
    an option to buy CMS Gas Transmissions ownership interest
    in TGN, subject to the rights of other third parties,
    the rights to certain proceeds that may be awarded and received
    by CMS Gas Transmission in connection with certain legal
    proceedings, including an ICSID arbitration award, and
    the rights to proceeds that Enterprises will receive if it sells
    its interest in CMS Generation San Nicolas Company.      Uncertainties:
  
    the impact of indemnity and environmental remediation
    obligations at Bay Harbor,
    the outcome of certain legal proceedings,
    the impact of representations, warranties, and related
    indemnities in connection with the sales of our international
    assets, and
    changes in commodity prices and interest rates on certain
    derivative contracts that do not qualify for hedge accounting
    and must be marked to market through earnings.  CMS ERM Electricity Sales Agreements:
   CMS-31




---



##### 



OTHER
    OUTLOOK
  Advanced Metering Infrastructure:
  Software Implementation:
  Michigan Public Service Commission:
  Litigation and Regulatory Investigation:
  Michigan Tax Legislation: 15-year
 IMPLEMENTATION OF
    NEW ACCOUNTING STANDARDS  SFAS No. 158, Employers Accounting for
    Defined Benefit Pension and Other Postretirement
    Plans  an amendment of FASB Statements No. 87,
    88, 106, and 132(R):
 CMS-32




---



##### 



FIN 48, Accounting for Uncertainty in Income
    Taxes:
       NEW ACCOUNTING
    STANDARDS NOT YET EFFECTIVE  SFAS No. 157, Fair Value
    Measurements:
    
    AROs,
    most of the nonfinancial assets and liabilities acquired in a
    business combination, and
    fair value measurements performed in conjunction with impairment
    analyses. CMS-33




---



##### 



SFAS No. 159, The Fair Value Option for
    Financial Assets and Financial Liabilities, Including an
    amendment to FASB Statement No. 115:
  SFAS No. 160, Noncontrolling Interests in
    Consolidated Financial Statements, an Amendment of ARB
    No. 51:
  FSP
    FIN 39-1,
    Amendment of FASB Interpretation No. 39: FIN 39-1,
  EITF Issue
    06-11,
    Accounting for Income Tax Benefits of Dividends on
    Share-Based Payment Awards: 06-11, 06-11
 CMS-34




---



##### 



CMS Energy
    Corporation
  CONSOLIDATED
    STATEMENTS OF INCOME (LOSS)
  Years Ended December 312007


2006


2005In MillionsOperating Revenue

$
6,464


$
6,126


$
5,879Earnings from Equity Method Investees


40



89



125Operating ExpensesFuel for electric generation


422



711



644Fuel costs mark-to-market at the MCV Partnership






204



(200
)Purchased and interchange power


1,407



709



441Cost of gas sold


2,273



2,131



2,296Electric sales contract termination


279







Other operating expenses


976



1,136



1,030Maintenance


201



297



230Depreciation and amortization


540



550



504General taxes


222



151



226Asset impairment charges, net of insurance recoveries


204



459



1,184Gain on asset sales, net


(21
)


(79
)


(6
)6,503



6,269



6,349Operating Income (Loss)


1



(54
)


(345
)Other Income (Deductions)Interest and dividends


96



76



60Regulatory return on capital expenditures


31



26



4Foreign currency gain (loss), net


1







(5
)Other income


40



31



33Other expense


(39
)


(21
)


(45
)129



112



47Fixed ChargesInterest on long-term debt


382



448



458Interest on long-term debt  related parties


14



15



29Other interest


48



27



14Capitalized interest


(6
)


(10
)


(38
)Preferred dividends of subsidiaries


2



5



5440



485



468Loss Before Income Taxes


(310
)


(427
)


(766
)Income Tax Benefit


(195
)


(188
)


(180
)Loss Before Minority Interests (Obligations), Net


(115
)


(239
)


(586
)Minority Interests (Obligations), Net


11



(106
)


(445
)Loss From Continuing Operations


(126
)


(133
)


(141
)Income (Loss) From Discontinued Operations, Net of Tax (Tax
    Benefit) of $(1), $32, and $20


(89
)


54



57Net Loss


(215
)


(79
)


(84
)Preferred Dividends


11



11



10Redemption Premium on Preferred Stock


1







Net Loss Available to Common Stockholders

$
(227
)

$
(90
)

$
(94
)  CMS-35




---



##### 



Years Ended December 312007


2006


2005In Millions, Except PerShare AmountsCMS EnergyNet LossNet Loss Available to Common Stockholders

$
(227
)

$
(90
)

$
(94
)Basic Earnings (Loss) Per Average Common ShareLoss from Continuing Operations

$
(0.62
)

$
(0.66
)

$
(0.71
)Gain (Loss) from Discontinued Operations


(0.40
)


0.25



0.27Net Loss Attributable to Common Stock

$
(1.02
)

$
(0.41
)

$
(0.44
)Diluted Earnings (Loss) Per Average Common ShareLoss from Continuing Operations

$
(0.62
)

$
(0.66
)

$
(0.71
)Gain (Loss) from Discontinued Operations


(0.40
)


0.25



0.27Net Loss Attributable to Common Stock

$
(1.02
)

$
(0.41
)

$
(0.44
)Dividends Declared Per Common Share

$
0.20


$



$
    CMS-36




---



##### 



CMS Energy
    Corporation
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended December 312007


2006


2005In MillionsCash Flows from Operating ActivitiesNet loss

$
(215
)

$
(79
)

$
(84
)Adjustments to reconcile net loss to net cash provided by
    operating activities Depreciation and amortization, net of
    nuclear decommissioning of $4, $6,  and $6


545



576



525Deferred income taxes and investment tax credit


(221
)


(271
)


(199
)Minority obligations, net


(10
)


(100
)


(440
)Asset impairment charges, net of insurance recoveries


204



459



1,184Postretirement benefits expense


131



131



112Electric sales contract termination


279







Shareholder class action settlement expense






125



Fuel costs mark-to-market at the MCV Partnership






204



(200
)Regulatory return on capital expenditures


(31
)


(26
)


(4
)Capital lease and other amortization


55



44



40Bad debt expense


37



28



23Loss (gain) on the sale of assets


112



(79
)


(20
)Earnings from equity method investees


(40
)


(89
)


(125
)Cash distributions from equity method investees


18



75



108Postretirement benefits contributions


(184
)


(69
)


(63
)Shareholder class action settlement payment


(125
)






Changes in other assets and liabilities:Decrease (increase) in accounts receivable and accrued revenues


(451
)


75



(246
)Decrease (increase) in accrued power supply and gas revenue


99



(91
)


(65
)Increase in inventories


(10
)


(105
)


(245
)Increase (decrease) in accounts payable


(45
)


(43
)


170Increase (decrease) in accrued expenses


(31
)


39



8Increase (decrease) in the MCV Partnership gas supplier funds on
    deposit






(147
)


173Decrease (increase) in other current and non-current assets


41



56



(38
)Increase (decrease) in other current and non-current liabilities


(131
)


(27
)


(16
)Net cash provided by operating activities


27



686



598Cash Flows from Investing ActivitiesCapital expenditures (excludes assets placed under capital lease)


(1,263
)


(670
)


(593
)Cost to retire property


(28
)


(78
)


(27
)Restricted cash and restricted short-term investments


49



124



(151
)Investments in nuclear decommissioning trust funds


(1
)


(21
)


(6
)Proceeds from nuclear decommissioning trust funds


333



22



39Purchases of available-for-sale SERP investments


(68
)


(4
)


(2
)Proceeds from available-for-sale SERP investments


64



6



3Proceeds from short-term investments










295Purchase of short-term investments










(186
)Maturity of the MCV Partnership restricted investment securities
    held-to-maturity






130



318Purchase of the MCV Partnership restricted investment securities
    held-to-maturity






(131
)


(270
)Proceeds from sale of assets


1,717



69



61Cash relinquished from sale of assets


(113
)


(148
)


Decrease (increase) in non-current notes receivable


(32
)


(50
)


1Other investing






2



25Net cash provided by (used in) investing activities


658



(749
)


(493
) CMS-37




---



##### 



Years Ended December 312007


2006


2005In MillionsCash Flows from Financing ActivitiesProceeds from notes, bonds, and other long-term debt

$
515


$
100


$
1,385Issuance of common stock


15



8



295Retirement of bonds and other long-term debt


(1,095
)


(493
)


(1,509
)Redemption of preferred stock


(32
)






Payment of common stock dividends


(45
)






Payment of preferred stock dividends


(11
)


(11
)


(11
)Payment of capital lease and financial lease obligations


(20
)


(26
)


(29
)Debt issuance costs, financing fees, and other


(17
)


(12
)


(57
)Net cash provided by (used in) financing activities


(690
)


(434
)


74Effect of Exchange Rates on Cash


2



1



(1
)Net Increase (Decrease) in Cash and Cash Equivalents


(3
)


(496
)


178Cash and Cash Equivalents, Beginning of Period


351



847



669Cash and Cash Equivalents, End of Period

$
348


$
351


$
847Other cash flow activities and non-cash investing and
    financing activities were:Cash transactionsInterest paid (net of amounts capitalized)

$
432


$
487


$
454Income taxes paid (net of refunds of $- , $2, and $11)


14



98



3Non-cash transactionsOther assets placed under capital lease

$
229


$
7


$
12    CMS-38




---



##### 



CMS ENERGY
    CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
  December 312007


2006In MillionsASSETSPlant and Property (At cost)Electric utility

$
8,555


$
8,504Gas utility


3,467



3,273Enterprises


391



453Other


34



3312,447



12,263Less accumulated depreciation, depletion and amortization


4,166



5,1948,281



7,069Construction
    work-in-progress


447



6398,728



7,708InvestmentsEnterprises


6



556Other


5



1011



566Current AssetsCash and cash equivalents at cost, which approximates market


348



249Restricted cash at cost, which approximates market


34



71Accounts receivable and accrued revenue, less allowances of $21
    in 2007 and $25 in 2006


837



502Notes receivable


68



48Accrued power supply and gas revenue


45



156Accounts receivable and notes receivable  related
    parties


2



62Inventories at average costGas in underground storage


1,123



1,129Materials and supplies


86



87Generating plant fuel stock


125



126Regulatory assets  postretirement benefits


19



19Deferred income taxes






155Deferred property taxes


158



150Assets held for sale






239Price risk management assets


1



45Prepayments and other


38



1052,884



3,143Non-current AssetsRegulatory AssetsSecuritized costs


466



514Postretirement benefits


921



1,131Customer Choice Act


149



190Other


504



497Nuclear decommissioning trust funds






602Deferred income taxes


99



Notes receivable, less allowances of $31 in 2007 and $50 in 2006


170



137Notes receivable  related parties, less allowance of
    $50 in 2006






125Assets held for sale






412Price risk management assets


1



19Other


263



3272,573



3,954Total Assets

$
14,196


$
15,371  CMS-39




---



##### 



December 312007


2006In MillionsSTOCKHOLDERS INVESTMENT AND LIABILITIESCapitalizationCommon stockholders equityCommon stock, authorized 350.0 shares; outstanding
    225.1 shares and 222.8 shares, respectively

$
2


$
2Other paid-in capital


4,480



4,468Accumulated other comprehensive loss


(144
)


(318
)Retained deficit


(2,208
)


(1,918
)2,130



2,234Preferred stock of subsidiary


44



44Preferred stock


250



261Long-term debt


5,385



6,200Long-term debt  related parties


178



178Non-current portion of capital and finance lease obligations


225



428,212



8,959Minority Interests


53



52Current LiabilitiesCurrent portion of long-term debt, capital and finance lease
    obligations


722



563Notes payable


1



2Accounts payable


432



481Accrued rate refunds


19



37Accounts payable  related parties


1



2Accrued interest


103



126Accrued taxes


308



301Regulatory liabilities


164



Deferred income taxes


41



Electric sales contract termination liability


279



Argentine currency impairment reserve


197



Legal settlement liability






200Liabilities held for sale






144Price risk management liabilities


9



70Other


201



2302,477



2,156Non-current LiabilitiesRegulatory LiabilitiesRegulatory liabilities for cost of removal


1,127



1,166Income taxes, net


533



539Other regulatory liabilities


313



249Postretirement benefits


858



1,066Deferred income taxes






123Deferred investment tax credit


58



62Asset retirement obligation


198



498Liabilities held for sale






59Price risk management liabilities


16



31Other


351



4113,454



4,204Commitments and Contingencies (Notes 3, 4, 6, 9 and 11)Total Stockholders Investment and Liabilities

$
14,196


$
15,371    CMS-40




---



##### 



CMS Energy
    Corporation
  Consolidated
    Statements of Common Stockholders Equity
  Years Ended December 312007


2006


2005


2007


2006


2005Number of Shares in Thousands


In MillionsCommon StockAt beginning and end of period













$
2


$
2


$
2Other Paid-in CapitalAt beginning of period


222,783



220,497



194,997



4,468



4,436



4,140Common stock repurchased


(318
)


(98
)


(88
)


(5
)


(2
)


(1
)Common stock reacquired


(19
)


(59
)














Common stock issued


2,339



2,375



25,493



30



33



296Common stock reissued


361



68



95



6



1



1Redemption of preferred stock














(19
)






At end of period


225,146



222,783



220,497



4,480



4,468



4,436Accumulated Other Comprehensive LossRetirement benefits liabilityAt beginning of period














(23
)


(19
)


(17
)Retirement benefits liability adjustments(a)


















3



(2
)Net gain arising during the period(a)














7







Amortization of net actuarial loss(a)














1







Adjustment to initially apply FASB Statement No. 158


















(7
)


At end of period














(15
)


(23
)


(19
)InvestmentsAt beginning of period














14



9



9Unrealized gain on investments(a)














1



5



Reclassification adjustments included in net loss(a)














(15
)






At end of period


















14



9Derivative instrumentsAt beginning of period














(12
)


35



(9
)Unrealized gain (loss) on derivative instruments(a)














(3
)


(15
)


51Reclassification adjustments included in net loss(a)














14



(32
)


(7
)At end of period














(1
)


(12
)


35Foreign currency translationAt beginning of period














(297
)


(313
)


(319
)Sale of Argentine assets(a)














128







Sale of Brazilian assets(a)














36







Other foreign currency translations(a)














5



16



6At end of period














(128
)


(297
)


(313
)At end of period














(144
)


(318
)


(288
)Retained DeficitAt beginning of period














(1,918
)


(1,828
)


(1,734
)Adjustment to initially apply FIN 48














(18
)






Net loss(a)














(215
)


(79
)


(84
)Preferred stock dividends declared














(11
)


(11
)


(10
)Common stock dividends declared














(45
)






Redemption of preferred stock(a)














(1
)






At end of period














(2,208
)


(1,918
)


(1,828
)Total Common Stockholders Equity













$
2,130


$
2,234


$
2,322  CMS-41




---



##### 



Years Ended December 312007


2006


2005In Millions(a) Disclosure of Comprehensive Loss:Net loss

$
(215
)

$
(79
)

$
(84
)Retirement benefits liability:Retirement benefits liability adjustments, net of tax (tax
    benefit) of $1 in 2006 and $(1) in 2005






3



(2
)Net gain arising during the period, net of tax of $5


7







Amortization of net actuarial loss, net of tax of $-


1







Investments:Unrealized gain on investments, net of tax of $- in 2007 and $2
    in 2006


1



5



Reclassification adjustments included in net loss, net of tax
    benefit of $(7)


(15
)






Derivative instruments:Unrealized gain (loss) on derivative instruments, net of tax
    (tax benefit)of $2 in 2007, $(11) in 2006, and $29 in 2005


(3
)


(15
)


51Reclassification adjustments included in net loss, net of tax
    (tax benefit) of $7 in 2007, $(19) in 2006, and $(9) in 2005


14



(32
)


(7
)Foreign currency translation:Sale of Argentine assets, net of tax of $68


128







Sale of Brazilian assets, net of tax of $20


36







Other foreign currency translations, net of tax of $2 in 2007,
    $9 in 2006, and $- in 2005


5



16



6Redemption of preferred stock, net of tax benefit of $1


(1
)






Total Comprehensive Loss

$
(42
)

$
(102
)

$
(36
)    CMS-42




---



##### 



(This page
    intentionally left blank)
  CMS-43




---



##### 



CMS ENERGY
    CORPORATION
  NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
 1: CORPORATE
    STRUCTURE AND ACCOUNTING POLICIES  Corporate Structure:
  Principles of Consolidation:
  Use of Estimates:
    Revenue Recognition Policy: (mark-to-market
  Accounting for Legal Fees:
  Accounting for MISO Transactions:
  Capitalized Interest:
  Cash Equivalents and Restricted Cash:
    Collective Bargaining Agreements:
 CMS-44




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Determination of Pension MRV of Plan Assets:
  Earnings Per Share:
  Financial and Derivative Instruments: available-for-sale available-for-sale
      Goodwill:
    In MillionsBalance at January 1, 2006

$
27Currency translation adjustment


(1
)Balance at December 31, 2006

$
26Currency translation adjustment


2Sale of CMS Energy Brasil S.A.


(28
)Balance at December 31, 2007

$
   Impairment of Long-Lived Assets and Equity Method
    Investments:
  held-in-use
   CMS-45




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      International Operations and Foreign Currency:
    Inventory:
    Maintenance and Depreciation:
    Years Ended December 31

2007


2006


2005Electric utility property


3.0
%


3.1
%


3.1%Gas utility property


3.6
%


3.6
%


3.6%Other property


8.7
%


8.2
%


7.6%  CMS-46




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Other Income and Other Expense:
  Years Ended December 31

2007


2006


2005In MillionsOther incomeInterest and dividends  related parties

$



$
8


$
9Gain on SERP investment


22







Return on stranded and security costs


6



5



6MCV Partnership emmission allowance sales






8



2Electric restructuring return


2



4



6Gain on investment


7



1



Settlement of contingent liability










3Refund of surety bond premium






1



All other


3



4



7Total other income

$
40


$
31


$
33   Years Ended December 31

2007


2006


2005In MillionsOther expenseAccretion expense

$



$
(4
)

$
(18
)Loss on SERP investment










(2
)Loss on reacquired and extinguished debt


(22
)


(5
)


(16
)Abandoned Midland project


(8
)






Derivative loss on debt tender offer


(3
)






Civic and political expenditures


(2
)


(2
)


(2
)Donations






(9
)


All other


(4
)


(1
)


(7
)Total other expense

$
(39
)

$
(21
)

$
(45
)   Property, Plant, and Equipment:
    Years Ended December 31

2007

2006

2005Composite AFUDC capitalization rate


7.4
%


7.5
%


7.6%  CMS-47




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Reclassifications:
  Trade Receivables and Notes Receivable:
  Unamortized Debt Premium, Discount, and Expense:
  Utility Regulation:
    CMS-48




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  December 31

End of Recovery Period

2007


2006In MillionsAssets Earning a Return:Customer Choice Act

2010

$
149


$
190Unamortized debt costs

2035


74



86Stranded Costs

See Note 3


68



65Electric restructuring implementation plan

2008


14



40Manufactured gas plant sites (Note 3)

2016


33



15Abandoned Midland project

n/a






9Other(a)

various


50



21Assets Not Earning a Return:SFAS No. 158 transition adjustment (Note 7)

various


851



1,038Securitized costs (Note 4)

2015


466



514Postretirement benefits (Note 7)

2011


89



112ARO (Note 8)

n/a


85



177Big Rock nuclear decommissioning and

n/a


129



35related costs (Note 3)Manufactured gas plant sites (Note 3)

n/a


17



41Palisades sales transaction costs (Note 2)

n/a


28



Other(a)

2011


6



8Total regulatory assets(b)



$
2,059


$
2,351Palisades refund  Current (Note 2)(c)



$
164


$
Cost of removal (Note 8)




1,127



1,166Income taxes, net (Note 9)




533



539ARO (Note 8)




141



180Palisades refund  Noncurrent (Note 2)(c)




140



Other(a)




32



69Total regulatory liabilities(b)



$
2,137


$
1,954     (a)
    
    At December 31, 2007 and 2006, other regulatory assets
    include a gas inventory regulatory asset and OPEB and pension
    expense incurred in excess of the MPSC-approved amount.
    Consumers will recover these regulatory assets from its
    customers by 2011. Other regulatory liabilities include
    liabilities related to the sale of sulfur dioxide allowances and
    AFUDC collected in excess of the MPSC-approved amount.(b)
    
    At December 31, 2007, we classified $19 million of
    regulatory assets as current regulatory assets and
    $2.040 billion of regulatory assets as non-current
    regulatory assets. At December 31, 2006, we classified
    $19 million of regulatory assets as current regulatory
    assets and $2.332 billion of regulatory assets as
    non-current regulatory assets. At December 31, 2007, we
    classified $164 million of regulatory liabilities as
    current regulatory liabilities and $1.973 billion of
    regulatory liabilities as non-current regulatory liabilities. At
    December 31, 2006, all of our regulatory liabilities
    represented non-current regulatory liabilities.(c)
    
    The MPSC order approving the Palisades and Big Rock ISFSI
    transaction requires that Consumers credits $255 million of
    excess proceeds and decommissioning amounts to its retail
    customers beginning in June 2007 through December 2008. The
    current portion of regulatory liabilities for Palisades refunds
    represents the remaining portion of this obligation, plus
    interest. There are additional excess sales proceeds and CMS-49




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  decommissioning fund balances above the amount in the MPSC
    order. The non-current portion of regulatory liabilities for
    Palisades refunds represents this obligation, plus interest. For
    additional details on the sale of Palisades and the Big Rock
    ISFSI, see Note 2, Asset Sales, Discountinued Operations,
    and Impairment Charges.      Years Ended December 31

2007


2006In MillionsRegulatory Assets for PSCR and GCRUnderrecoveries of power supply costs

$
45


$
156Regulatory Liabilities for PSCR and GCROverrecoveries of gas

$
19


$
37   New Accounting Standards Not Yet
    Effective: SFAS No. 157, Fair Value
    Measurements
    
    AROs,
    most of the nonfinancial assets and liabilities acquired in a
    business combination, and
    fair value measurements performed in conjunction with impairment
    analyses.  available-for-sale
  SFAS No. 159, The Fair Value Option for Financial
    Assets and Financial Liabilities, Including an amendment to FASB
    Statement No. 115:
  SFAS No. 160, Noncontrolling Interests in
    Consolidated Financial Statements, an Amendment of ARB
    No. 51:
 CMS-50




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    FIN 39-1, Amendment of FASB Interpretation No. 39: FIN 39-1,
  EITF Issue
    06-11,
    Accounting for Income Tax Benefits of Dividends on Share-Based
    Payment Awards: 06-11, 06-11
 2: ASSET
    SALES, DISCONTINUED OPERATIONS AND IMPAIRMENT CHARGES  Asset
    Sales
      Disposal ofContinuing


DiscontinuedOperations


OperationsCash


Pretax


PretaxMonth sold

Business

Proceeds


Gain (Loss)


Gain (Loss)In MillionsMarch

El Chocon(a)

$
50


$
34


$
March

Argentine/Michigan businesses(b)


130



(5
)


(278
)April

Palisades(c)


333







April

SENECA(d)


106







46May

Middle East, Africa, and India businesses(e)


792



(15
)


96June

CMS Energy Brasil S.A.(f)


201







3August

GasAtacama(g)


80







October

Jamaica(h)


14



1



Various

Other


11



6



Total

$
1,717


$
21


$
(133
)  CMS-51




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    (a)
    
    We sold our interest in El Chocon to Endesa, S.A.(b)
    
    We completed the sale of a portfolio of our businesses in
    Argentina and our northern Michigan non-utility natural gas
    assets to Lucid Energy. We also entered into agreements that
    grant Lucid Energy:  
    an option to buy CMS Gas Transmissions ownership interest
    in TGN, subject to the rights of other third parties,
    the rights to certain proceeds that may be awarded and received
    by CMS Gas Transmission in connection with certain legal
    proceedings, including an ICSID arbitration award, and
    the rights to proceeds that Enterprises will receive if it sells
    its interest in CMS Generation San Nicolas Company.  Under these agreements, we have assigned our rights to certain
    awards or proceeds that we may receive in the future. Of the
    total consideration received in the sale, we allocated
    $32 million to these agreements and recorded this amount as
    a deferred credit on our Consolidated Balance Sheets. Due to the
    settlement of certain legal proceedings in 2007, a portion of
    CMS Gas Transmissions obligations under these agreements
    has been satisfied. Accordingly, we recognized $17 million
    of the deferred credit as a gain.For details on the ICSID arbitration award, see Note 3,
    Contingencies.(c)
    
    In April 2007, we sold Palisades to Entergy for
    $380 million, and received $363 million after various
    closing adjustments such as working capital and capital
    expenditure adjustments and nuclear fuel usage and inventory
    adjustments. We also paid Entergy $30 million to assume
    ownership and responsibility for the Big Rock ISFSI. Because of
    the sale of Palisades, we paid the NMC, the former operator of
    Palisades, $7 million in exit fees and forfeited our
    $5 million investment in the NMC.Entergy assumed responsibility for the future decommissioning of
    Palisades and for storage and disposal of spent nuclear fuel
    located at Palisades and the Big Rock ISFSI sites. At closing,
    we transferred $252 million in decommissioning trust fund
    balances to Entergy. We are presently crediting excess
    decommissioning funds, which totaled $189 million to our
    retail customers through the end of 2008. Modification to the
    terms of the transaction allowed us immediate access to
    additional excess decommissioning trust funds of
    $123 million. The distribution of these funds is currently
    under review by the MPSC in our electric rate case filing. We
    have recorded this obligation, plus interest, as a regulatory
    liability on our Consolidated Balance Sheets.The MPSC order approving the Palisades transaction allows us to
    recover the book value of Palisades. As a result, we are
    presently crediting proceeds in excess of book value of
    $66 million to our retail customers through the end of
    2008. After closing adjustments, which are subject to MPSC
    review, proceeds in excess of the book value were
    $77 million. We recorded the excess proceeds as a
    regulatory liability on our Consolidated Balance Sheets.
    Recovery of our transaction costs of $28 million, which
    includes the NMC exit fees and investment forfeiture, is
    presently under review by the MPSC in our current electric rate
    case. We recorded these costs as a regulatory asset on our
    Consolidated Balance Sheets as recovery is probable.We accounted for the disposal of Palisades as a financing for
    accounting purposes and thus we recognized no gain on the
    Consolidated Statements of Income (Loss). We accounted for the
    remaining non-real estate assets and liabilities associated with
    the transaction as a sale. For additional details on the
    Palisades finance obligation, see Note 11, Leases.(d)
    
    We sold our ownership interest in SENECA and certain associated
    generating equipment to PDVSA, which is owned by the Bolivarian
    Republic of Venezuela.(e)
    
    We sold our ownership interest in businesses in the Middle East,
    Africa, and India to TAQA. Gross proceeds from the sale included
    $792 million in cash proceeds and TAQAs assumption of
    $108 million in debt. Businesses included in the sale were
    Takoradi, Taweelah, Shuweihat, Jorf Lasfar, Jubail, and Neyveli.(f)
    
    We sold CMS Energy Brasil S.A. to CPFL Energia S.A., a Brazilian
    utility. Gross proceeds included $201 million in cash
    proceeds and CPFL Energia S.A.s assumption of a
    $10 million tax liability. CMS-52




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   (g)
    
    We sold our investment in GasAtacama to Endesa S.A.(h)
    
    We sold our investment in Jamaica to AEI.    ContinuingOperationsGross Cash


PretaxMonth sold

Business/Project

Proceeds


GainIn MillionsOctober

Land in Ludington, Michigan(a)

$
6


$
2November

MCV GP II(b)


61



77Various

Other


2



Total

$
69


$
79     (a)
    
    We sold 36 parcels of land near Ludington, Michigan. Consumers
    held a majority share of the land, which we co-owned with DTE
    Energy.(b)
    
    In November 2006, we sold all of our interests in the
    Consumers subsidiaries that held the MCV Partnership and
    the MCV Facility to an affiliate of GSO Capital Partners and
    Rockland Capital Energy Investments.        ContinuingOperationsGross Cash


PretaxMonth sold

Business/Project

Proceeds


GainIn MillionsFebruary

GVK

$
21


$
4April

SLAP


23



2April

Gas turbine and auxiliary equipment


15



Various

Other


2



Total

$
61


$
6   Discontinued
    Operations
   CMS-53




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      In MillionsAssetsCash

$
102Accounts receivable, net


105Notes receivable


110Goodwill


25Investments


33Property, plant and equipment, net


233Other


43Total assets

$
651LiabilitiesAccounts payable

$
82Accrued taxes


30Minority interest


40Other


51Total liabilities

$
203     Years Ended December 31

2007


2006


2005In MillionsRevenues

$
235


$
684


$
409Discontinued operations:Pretax income (loss) from discontinued operations

$
(90
)

$
86


$
77Income tax expense (benefit)


(1
)


32



20Income (Loss) From Discontinued Operations

$
(89
)(a)

$
54


$
57     (a)
    
    Includes a loss on disposal of our Argentine and northern
    Michigan non-utility assets of $278 million
    ($171 million after-tax and after minority interest), a
    gain on disposal of SENECA of $46 million ($33 million
    after-tax and after minority interest), a gain on disposal of
    our ownership interest in businesses in the Middle East, Africa,
    and India of $96 million ($62 million after-tax), and
    a gain on disposal of CMS Energy Brasil S.A. of $3 million
    ($2 million after-tax).Income (Loss) From Discontinued Operations includes a provision
    for anticipated closing costs and a portion of CMS Energys
    parent company interest expense. Interest expense of
    $7 million for 2007, $17 million for 2006, and
    $16 million for 2005 has been allocated based on the net
    book value of the asset to be sold divided by CMS Energys
    total capitalization of each discontinued operation multiplied
    by CMS Energys interest expense. CMS-54




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Impairment
    Charges
    Years Ended December 31

2007


2006


2005In MillionsAsset impairments:Enterprises:TGN(a)

$
140


$



$
GasAtacama(b)


35



239



Jamaica(c)


22







PowerSmith(d)


5







Prairie State(e)


2







MCV Partnership(f)






218



1,184Other






2



Total asset impairments

$
204


$
459


$
1,184     (a)
    
    In the first quarter of 2007, we recorded a $215 million
    impairment charge to recognize the reduction in fair value of
    our investment in TGN, a natural gas business in Argentina. The
    impairment included a cumulative net foreign currency
    translation loss of approximately $197 million.In December 2005, certain insurance underwriters paid
    $75 million to CMS Gas Transmission in respect of their
    insurance obligations resulting from the non-payment of the
    ICSID award. We recorded this payment as a deferred credit on
    our Consolidated Balance Sheets because of a contingent
    obligation to refund the proceeds if the arbitration decision
    was annulled. In September 2007, the contingent repayment
    obligation was eliminated by agreement and a separate
    arbitration panel ruling on the annulment issue upheld the prior
    ICSID award. As a result, we recognized the $75 million
    deferred credit in Asset impairment charges, net of insurance
    recoveries on our Consolidated Statements of Income (Loss). For
    additional details on this settlement, see Note 3,
    Contingencies, Other Contingencies 
    Argentina.(b)
    
    In August 2006, a major gas supplier notified GasAtacama that it
    would no longer deliver gas to GasAtacama due to the Argentine
    governments decision to increase the cost of its gas
    exports using a special tax. We performed an impairment analysis
    of our investment in GasAtacama and concluded that there had
    been a decline in fair value that was other than temporary. We
    recorded an impairment charge in the third quarter of 2006. As a
    result, our consolidated net income was reduced by
    $169 million, net of tax and minority interest.In the second quarter of 2007, we recorded a further impairment
    charge to reflect expected proceeds from the pending sale of our
    investment in GasAtacama.(c)
    
    In the first quarter of 2007, we recorded an impairment charge
    to reflect the fair value of our investment in an electric
    generating plant in Jamaica by discounting a set of
    probability-weighted streams of future operating cash flows.(d)
    
    In the first quarter of 2007, we recorded an impairment charge
    to reflect the fair value of our investment in PowerSmith as
    determined in sale negotiations.(e)
    
    In the second quarter of 2007, we recorded an impairment charge
    to reflect our withdrawal from the
    co-development
    of Prairie State with Peabody Energy because it did not meet our
    investment criteria.(f)
    
    In November 2006, we recorded an impairment charge of
    $218 million to recognize the reduction in fair value of
    the MCV Facilitys real estate assets. The result was an
    $80 million reduction to our consolidated net income after
    considering tax effects and minority interest.In the third quarter of 2005, based on forecasts for higher
    natural gas prices, the MCV Partnership determined an impairment
    analysis considering revised forward natural gas price
    assumptions was required. The MCV Partnership determined the
    fair value of its fixed assets by discounting a set of
    probability-weighted streams of future operating cash flows. The
    carrying value of the MCV Partnerships fixed assets
    exceeded the estimated CMS-55




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  fair value resulting in impairment charges of
    $1.159 billion to recognize the reduction in fair value of
    the MCV Facilitys fixed assets and $25 million of
    interest capitalized during the construction of the MCV
    Facility. Our 2005 consolidated net income was reduced by
    $385 million, after considering tax effects and minority
    interest.We report our interests in the MCV Partnership as a component of
    our Enterprises business segment. 3: CONTINGENCIES  DOJ Investigation:
  SEC Investigation and Settlement: cease-and-desist
  Securities Class Action Settlement:
   CMS-56




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Gas Index Price Reporting Investigation:
  Gas Index Price Reporting Litigation:
  Katz Technology Litigation:
  Bay Harbor:
     CMS-57




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               CMS-58




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    30-year
  Consumers
    Electric Utility Contingencies
  Electric Environmental Matters:
  Cleanup and Solid Waste:
      Ludington PCB:
  Electric Utility Plant Air Permit Issues:
 CMS-59




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Litigation:
  Consumers
    Electric Utility Rate Matters
  Electric ROA:
  Power Supply Costs:
  Power Supply Cost Recovery ReconciliationNet Under-

PSCR CostPSCR Year

Date Filed

Order Date

recovery

of Power Sold

Description of Net Underrecovery2005 Reconciliation

March 2006

July 2007

$36 million

$1.081 billion

MPSC approved the recovery of our $36 million underrecovery,
    including interest, related to our commercial and industrial
    customers.2006 Reconciliation

March 2007

Pending

$105 million(a)

$1.490 billion

Underrecovery relates to our increased METC costs and coal
    supply costs, certain increased sales, and other cost increases
    beyond those included in the 2006 PSCR plan filings.    (a)
    
    $99 million as recommended by a February 2008 ALJ Proposal
    for Decision. In a separate matter, this ALJ also recommended
    that we refund $62 million in proceeds from the sale of
    excess sulfur dioxide allowances. In accordance with FERC
    regulations, we previously reserved these proceeds as a
    regulatory liability pending final direction on disposition of
    the proceeds from the MPSC.  2007 PSCR Plan:
 CMS-60




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    2008 PSCR Plan
    Electric Rate Case:
  
    recovery of the purchase of the Zeeland power plant,
    approval to remove the costs associated with Palisades,
    approval of a plan for the distribution of additional excess
    proceeds from the sale of Palisades to customers, effectively
    offsetting the partial and immediate rate relief for up to nine
    months, and
    partial and immediate rate relief associated with 2007 capital
    investments, a $400 million equity infusion into Consumers,
    and increased distribution system operation and maintenance
    costs including employee pension and health care costs.      Other
    Consumers Electric Utility Contingencies
  The MCV PPA: 35-year
  Regulatory-out Provision in the MCV PPA:
   CMS-61




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Nuclear Matters: Big Rock Decommissioning:
  Nuclear Fuel Disposal Cost:
  DOE Litigation:
    Consumers
    Gas Utility Contingencies
  Gas Environmental Matters:
 CMS-62




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  10-year
    Gas Title Transfer Tracking Fees and
    Services:
  FERC Investigation:
  Consumers
    Gas Utility Rate Matters
  Gas Cost Recovery:
    Gas Cost Recovery ReconciliationNet Over-

GCR CostGCR Year

Date Filed

Order Date

recovery

of Gas Sold

Description of Net Overrecovery2005-2006

June 2006

April 2007

$3 million

$1.8 billion

The net overrecovery includes $1 million interest income through
    March 2006, which resulted from a net underrecovery position
    during most of the GCR period.2006-2007

June 2007

Pending

$5 million

$1.7 billion

The total overrecovery amount reflects an overrecovery of $1
    million plus $4 million in accrued interest owed to customers.   GCR plan for year
    2005-2006: 2005-2006 2005-2006
 CMS-63




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  GCR plan for year
    2006-2007: 2006-2007
  GCR plan for year
    2007-2008: 2007-2008
    GCR plan for year
    2008-2009: 2008-2009
  
    a base GCR ceiling factor of $8.17 per mcf, plus
    a quarterly GCR ceiling price adjustment contingent upon future
    events.  2007 Gas Rate Case:
  2008 Gas Rate Case:
  Other
    Contingencies
  Argentina:
       CMS-64




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Quicksilver Resources, Inc.:
      Star Energy:
  T.E.S. Filer City Air Permit Issue:
  Equatorial Guinea Tax Claim:
  Moroccan Tax Claim:
 CMS-65




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  CMS ERM Electricity Sales Agreements:
      Guarantees and Indemnifications:
    FIN 45Maximum


CarryingGuarantee Description

Issue Date

Expiration Date

Obligation


AmountIn MillionsIndemnifications from asset sales and other agreements

Various

Indefinite

$
1,446
(a)

$
88
(a)Surety bonds and other indemnifications

Various

Indefinite


24



Guarantees and put options

Various

Various through
    September 2027


99
(b)


1     (a)
    
    The majority of this amount arises from provisions in stock and
    asset sales agreements under which we indemnify the purchaser
    for losses resulting from claims related to tax disputes, claims
    related to power purchase agreements and the failure of title to
    the assets or stock sold by us to the purchaser. As of
    December 31, 2007, we have an $88 million liability in
    connection with indemnities related to the sale of certain
    subsidiaries. We believe the likelihood of loss for the
    remaining indemnifications to be remote.(b)
    
    Maximum obligation includes $85 million related to the MCV
    Partnerships non-performance under a steam and electric
    power agreement with Dow. We sold our interests in the MCV
    Partnership and the FMLP. The sales agreement calls for the
    purchaser, an affiliate of GSO Capital Partners and Rockland
    Capital Energy Investments, to pay $85 million, subject to
    certain reimbursement rights, if Dow terminates an agreement
    under which the MCV Partnership provides it steam and electric
    power. This agreement expires in March 2016, subject to certain
    terms and conditions. The purchaser secured its reimbursement
    obligation with an irrevocable letter of credit of up to
    $85 million. CMS-66




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     Guarantee Description

How Guarantee Arose

Events That Would Require PerformanceIndemnifications from asset sales and other agreements

Stock and asset sales agreements

Findings of misrepresentation, breach of warranties, tax claims
    and other specific events or circumstancesSurety bonds and other indemnifications

Normal operating activity, permits and licenses

NonperformanceGuarantees and put options

Normal operating activity Agreement to provide power and steam
    to Dow, Bay Harbor remediation efforts

Nonperformance or non-payment by a subsidiary under a related
    contract, MCV Partnerships nonperformance or non-payment
    under a related contract, Owners exercising put options
    requiring us to purchase property       Other:
   CMS-67




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  4: FINANCINGS
    AND CAPITALIZATION    Interest Rate (%)


Maturity

2007


2006In MillionsCMS Energy
    CorporationSenior notes


9.875


2007

$



$
2898.900


2008






2607.500


2009






4097.750


2010


300



3008.500


2011


300



3006.300


2012


150



150Variable
(a)

2013


150



6.875


2015


125



1256.550


2017


250



3.375
(b)

2023


150



1502.875
(b)

2024


288



2881,713



2,271Other












1Total  CMS Energy Corporation








1,713



2,272Consumers Energy
    CompanyFirst mortgage bonds


4.250


2008


250



2504.800


2009


200



2004.400


2009


150



1504.000


2010


250



2505.000


2012


300



3005.375


2013


375



3756.000


2014


200



2005.000


2015


225



2255.500


2016


350



3505.150


2017


250



2505.650


2020


300



3005.650


2035


145



1475.800


2035


175



1753,170



3,172Senior notes


6.375


2008


159



1596.875


2018


180



180Securitization bonds


5.442
(c)

2008-2015


309



340Nuclear fuel disposal liability





(d)


159



152Tax-exempt pollution control revenue bonds


Various


2010-2035


161



161Total  Consumers Energy Company








4,138



4,164Other
    Subsidiaries








236



328Total principal amount outstanding








6,087



6,764Current amounts








(692
)


(550
)Net unamortized discount








(10
)


(14
)Total long-term debt







$
5,385


$
6,200     (a)
    
    The variable rate senior notes bear interest at three-month
    LIBOR plus 95 basis points (6.1925 percent at
    December 31, 2007). CMS-68




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   (b)
    
    Contingently convertible notes. See the Contingently
    Convertible Securities section in this Note for further
    discussion of the conversion features.(c)
    
    Represents the weighted average interest rate at
    December 31, 2007 (5.384 percent at December 31,
    2006).(d)
    
    The maturity date is uncertain.  Financings:
  Principal(In millions)


Interest Rate (%)


Issue/Retirement Date

Maturity DateDebt IssuancesCMS EnergySenior notes

$
250



6.55
%

July 2007

July 2017Senior notes


150



Variable


July 2007

January 2013Total

$
400Debt Retirements:CMS EnergySenior notes

$
260



8.90
%

June 2007

July 2008Senior notes


409



7.50
%

July and August 2007

January 2009Senior notes


289



9.875
%

October 2007

October 2007EnterprisesCMS GenerationInvestment Co. IVBank Loan


108



Variable


May 2007

December 2008Total

$
1,066   First Mortgage Bonds:
  Securitization Bonds:
  Long-Term Debt  Related Parties:
    Debenture and related party

Interest Rate (%)

Maturity

2007

2006In MillionsConvertible subordinated debentures, CMS Energy Trust I


7.75



2027


$
178


$
178  CMS-69




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Debt Maturities:
  Payments Due2008

2009

2010

2011

2012In MillionsLong-term debt and long-term debt  related parties

$
542


$
414


$
664


$
642


$
504   Regulatory Authorization for Financings:
    
    up to $1.5 billion of new issuance for general corporate
    purposes and
    up to $1.0 billion for purposes of refinancing or refunding
    existing long-term debt.      Revolving Credit Facilities:
  OutstandingAmount of


Amount


Letters of


AmountCompany

Expiration Date

Facility


Borrowed


Credit


AvailableIn MillionsCMS Energy(a)

April 2, 2012

$
300


$



$
278


$
22Consumers(b)

March 30, 2012


500







203



297Consumers(c)

November 28, 2008


200



NA



185



15     (a)
    
    In January 2008, the lenders increased the commitments for CMS
    Energys credit facility from $300 million to
    $550 million.(b)
    
    In January 2008, $185 million of letters of credit were
    cancelled, resulting in the amount of credit available of
    $482 million under this facility.(c)
    
    Secured revolving letter of credit facility.  Dividend Restrictions:
   CMS-70




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Sale of Accounts Receivable:
  Years Ended December 31

2007

2006In MillionsNet cash flow as a result of accounts receivable financing

$
(325
)

$
Collections from customers

$
5,881


$
5,684   Capitalization:
  
    350 million shares of CMS Energy Common Stock, par value
    $0.01 per share, and
    10 million shares of CMS Energy Preferred Stock, par value
    $0.01 per share.  Preferred Stock:
  Number of SharesDecember 31

2007


2006


2007


2006In MillionsPreferred stock4.50% convertible,Authorized 10,000,000 shares(a)


5,000,000



5,000,000


$
250


$
250Preferred subsidiary interest(b)














11Total preferred stock









$
250


$
261     (a)
    
    See the Contingently Convertible Securities section
    in this Note for further discussion of the convertible preferred
    stock.(b)
    
    In February 2007, we repurchased our non-voting preferred
    subsidiary interest of $11 million and redeemed it for a
    cash payment of $32 million. We reversed the original
    $19 million addition to
    paid-in-capital
    and charged a $1 million redemption premium to retained
    deficit.  Preferred Stock of Subsidiary:
  OptionalRedemption


Number of SharesDecember 31

Series


Price


2007


2006


2007


2006In MillionsPreferred stockCumulative $100 par value, Authorized
    7,500,000 shares, with no mandatory redemption

$
4.16


$
103.25



68,451



68,451


$
7


$
7$
4.50


$
110.00



373,148



373,148



37



37Total Preferred stock of subsidiary

















$
44


$
44  CMS-71




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Contingently Convertible Securities:
  Adjusted


AdjustedOutstanding


Conversion


TriggerSecurity

Maturity


(In millions)


Price


Price4.50% preferred stock





$
250


$
9.78


$
11.733.375% senior notes


2023


$
150


$
10.55


$
12.662.875% senior notes


2024


$
288


$
14.58


$
17.49            5: EARNINGS
    PER SHARE    Years Ended December 31

2007


2006


2005In Millions, Exceptper Share AmountsLoss Available to Common StockholdersLoss from Continuing Operations

$
(126
)

$
(133
)

$
(141
)Less Preferred Dividends and Redemption Premiums


(12
)


(11
)


(10
)Loss from Continuing Operations Available to Common
    Stockholders  Basic and Diluted


(138
)


(144
)


(151
)Average Common Shares Outstanding Applicable to Basic and
    Diluted EPSWeighted Average Shares  Basic and Diluted


222.6



219.9



211.8Loss Per Average Common Share Available to Common
    StockholdersBasic

$
(0.62
)

$
(0.66
)

$
(0.71
)Diluted

$
(0.62
)

$
(0.66
)

$
(0.71
)   Contingently Convertible Securities:
 CMS-72




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Stock Options, Warrants and Restricted Stock:
  Convertible Debentures:
  
    increased the numerator of diluted EPS by $9 million from
    an assumed reduction of interest expense, net of tax, and
    increased the denominator of diluted EPS by 4.2 million
    shares.   6: FINANCIAL
    AND DERIVATIVE INSTRUMENTS  Financial Instruments:
    2007

2006December 31

Book Value

Fair Value

Book Value

Fair ValueIn MillionsLong-term debt(a)

$
6,077


$
6,287


$
6,750


$
6,946Long-term debt  related parties


178



173



178



155     (a)
    
    Includes current maturities of $692 million at
    December 31, 2007 and $550 million at
    December 31, 2006. Settlement of long-term debt is
    generally not expected until maturity.    2007


2006Unrealized


Unrealized


Fair





Unrealized


Unrealized


FairDecember 31

Cost


Gains


Losses


Value


Cost


Gains


Losses


ValueIn MillionsNuclear decommissioning investments:Equity securities

$



$



$



$



$
140


$
150


$
(4
)

$
286Debt securities


















307



4



(2
)


309SERP:Equity securities


62











62



36



21







57Debt securities


13











13



13











13  CMS-73




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    In MillionsDue after one year through five years

$
5Due after five years through ten years


7Due after ten years


1Total

$
13     Derivative Instruments:
      
    the relationship between the derivative instrument and the
    forecasted transaction being hedged must be formally documented
    at inception,
    the derivative instrument must be highly effective in offsetting
    the hedged transactions cash flows, and
    the forecasted transaction being hedged must be probable.     CMS-74




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    
    they do not have a notional amount (that is, a number of units
    specified in a derivative instrument, such as MWh of electricity
    or bcf of natural gas),
    they qualify for the normal purchases and sales
    exception, or
    there is not an active market for the commodity.      December 31

2007


2006Fair


Unrealized





Fair


UnrealizedDerivative Instruments

Cost


Value


Loss


Cost


Value


Gain (Loss)In MillionsCMS ERM derivative contracts:Non-trading electric/gas contracts(a)

$



$
(18
)

$
(18
)

$



$
31


$
31Trading electric/gas contracts(b)






(5
)


(5
)


(11
)


(68
)


(57
)Derivative contracts associated with equity investments
    in:Shuweihat(c)


















(14
)


(14
)Taweelah(c)














(35
)


(11
)


24Jorf Lasfar(c)


















(5
)


(5
)Other


















1



1     (a)
    
    The fair value of CMS ERMs non-trading electric and gas
    contracts decreased significantly during 2007 for two reasons.
    First, a natural gas contract with Quicksilver was prospectively
    rescinded by court action. CMS ERM had recorded a derivative
    asset for this contract, representing cumulative unrealized
    mark-to-market gains. See Note 3, Contingencies,
    Other Contingencies  Quicksilver Resources,
    Inc. for additional details. In addition, CMS ERM recorded
    a derivative liability of $18 million related to the
    amendment of an electricity sales agreement. See Note 3,
    Contingencies, Other Contingencies  CMS ERM
    Electricity Sales Agreements for additional details.(b)
    
    The fair value of CMS ERMs trading electric and gas
    contracts increased significantly during 2007 due to the
    termination of certain gas contracts. CMS ERM had recorded
    derivative liabilities, representing cumulative unrealized
    mark-to-market losses, associated with these contracts.(c)
    
    We sold our equity investments in Shuweihat, Taweelah, and Jorf
    Lasfar in May 2007. Therefore, we no longer reflect our share of
    the fair value of the derivatives contracts held by these
    businesses in our consolidated financial statements.   CMS-75




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  CMS ERM Contracts:
    02-03.
  Derivative Contracts Associated with Equity Investments:
    Credit Risk:
      Net Exposure

Net ExposureExposure





from Investment

from InvestmentBefore

Collateral

Net

Grade

GradeCollateral(a)

Held

Exposure

Companies

Companies (%)(In Millions)CMS ERM

$
1


$



$
1


$
1



100
%     (a)
    
    Exposure is reflected net of payables or derivative liabilities
    if netting arrangements exist. CMS-76




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    7: RETIREMENT
    BENEFITS    
    a non-contributory, qualified defined benefit Pension Plan
    (closed to new non-union participants as of July 1, 2003
    and closed to new union participants as of September 1,
    2005),
    a qualified cash balance Pension Plan for certain employees
    hired between July 1, 2003 and August 31, 2005,
    a non-contributory, qualified DCCP for employees hired on or
    after September 1, 2005,
    benefits to certain management employees under a
    non-contributory, nonqualified defined benefit SERP (closed to
    new participants as of March 31, 2006),
    benefits to certain management employees under a
    non-contributory, nonqualified DC SERP hired on or after
    April 1, 2006,
    health care and life insurance benefits under OPEB,
    benefits to a selected group of management under a
    non-contributory, nonqualified EISP, and
    a contributory, qualified defined contribution 401(k) plan.  Pension Plan:
    Pension


OPEBPlan liability transferred to Entergy

$
38


$
20Trust assets transferred to Entergy


22



5Net adjustment

$
16


$
15     SERP:
   CMS-77




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    401(k):
    EISP:
  OPEB:
    One Percentage

One PercentagePoint Increase

Point Decrease(In Millions)Effect on total service and interest cost component

$
21


$
(17
)Effect on postretirement benefit obligation

$
208


$
(176
)     SFAS No. 158, Employers Accounting for
    Defined Benefit Pension and Other Postretirement
    Plans  an amendment of FASB Statements No. 87,
    88, 106, and 132(R):
 CMS-78




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Assumptions:
  Weighted
    average for benefit obligations:
  Pension & SERP


OPEBYears Ended December 31

2007


2006


2005


2007


2006


2005Discount rate(a)


6.40%



5.65%



5.75%



6.50%



5.65%



5.75%Expected long-term rate of return on plan assets(b)


8.25%



8.25%



8.50%



7.75%



7.75%



8.00%Mortality table(c)


2000



2000



2000



2000



2000



2000Rate of compensation increase:Pension


4.00%



4.00%



4.00%SERP


5.50%



5.50%



5.50%   Weighted
    average for net periodic benefit cost:
  Pension & SERP


OPEBYears Ended December 31

2007


2006


2005


2007


2006


2005Discount rate(a)


5.65%



5.75%



5.75%



5.65%



5.75%



5.75%Expected long-term rate of return on plan assets(b)


8.25%



8.50%



8.75%



7.75%



8.00%



8.25%Mortality table(c)


2000



2000



2000



2000



2000



2000Rate of compensation increase:Pension


4.00%



4.00%



3.50%SERP


5.50%



5.50%



5.50%     (a)
    
    The discount rate represents the market rate for high-quality
    AA-rated corporate bonds with durations corresponding to the
    expected durations of the benefit obligations and is used to
    calculate the present value of the expected future cash flows
    for benefit obligations under our pension plans.(b)
    
    We determine our long-term rate of return by considering
    historical market returns, the current and expected future
    economic environment, the capital market principles of risk and
    return, and the expert opinions of individuals and firms with
    financial market knowledge. We consider the asset allocation of
    the portfolio in forecasting the future expected total return of
    the portfolio. The goal is to determine a long-term rate of
    return that can be incorporated into the planning of future cash
    flow requirements in conjunction with the change in the
    liability. Annually, we review for reasonableness and
    appropriateness of the forecasted returns for various classes of
    assets used to construct an expected return model.(c)
    
    We utilize the Combined Healthy RP-2000 Table from the 2000
    Group Annuity Mortality Tables. CMS-79




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Costs:
  Pension & SERPYears Ended December 31

2007


2006


2005In MillionsNet periodic pension costService cost

$
50


$
51


$
44Interest expense


91



88



83Expected return on plan assets


(79
)


(85
)


(97
)Amortization of:Net loss


46



43



35Prior service cost


7



7



6Net periodic pension cost


115



104



71Regulatory adjustment(a)


(22
)


(11
)


Net periodic pension cost after regulatory adjustment

$
93


$
93


$
71   OPEBYears Ended December 31

2007


2006


2005In MillionsNet periodic OPEB costService cost

$
25


$
23


$
23Interest expense


69



64



61Expected return on plan assets


(62
)


(57
)


(54
)Amortization of:Net loss


22



20



20Prior service credit


(10
)


(10
)


(9
)Net periodic OPEB cost


44



40



41Regulatory adjustment(a)


(6
)


(2
)


Net periodic OPEB cost after regulatory adjustment


38



38


$
41     (a)
    
    Regulatory adjustments are the differences between amounts
    included in rates and the periodic benefit cost calculated
    pursuant to SFAS No. 87 and SFAS No. 106.
    These adjustments are deferred as a regulatory asset and will be
    included in future rate cases. The pension regulatory asset had
    a balance of $33 million at December 31, 2007 and
    $11 million at December 31, 2006. The OPEB regulatory
    asset had a balance of $8 million at December 31, 2007
    and $2 million at December 31, 2006.     CMS-80




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Reconciliations:
  Pension Plan


SERP


OPEBYears Ended December 31

2007


2006


2007


2006


2007


2006In MillionsBenefit obligation at beginning of period

$
1,576


$
1,510


$
92


$
91


$
1,243


$
1,136Service cost


49



49



1



2



25



23Interest cost


86



83



5



5



69



64Actuarial loss (gain)


30



51



1



(2
)


(128
)


70Palisades sale


(38
)














(20
)


Benefits paid


(138
)


(117
)


(4
)


(4
)


(53
)


(50
)Benefit obligation at end of period(a)


1,565



1,576



95



92



1,136



1,243Plan assets at fair value at beginning of period


1,040



1,018











798



714Actual return on plan assets


89



126











55



73Company contribution


109



13



4



4



52



58Palisades sale


(22
)














(5
)


Actual benefits paid(b)


(138
)


(117
)


(4
)


(4
)


(48
)


(47
)Plan assets at fair value at end of period


1,078



1,040











852



798Funded status at end of measurement period


(487
)


(536
)


(95
)


(92
)


(284
)


(445
)Additional VEBA Contributions or Non-Trust Benefit Payments


















12



14Funded status at December 31(c)

$
(487
)

$
(536
)

$
(95
)

$
(92
)

$
(272
)

$
(431
)     (a)
    
    The Medicare Prescription Drug, Improvement and Modernization
    Act of 2003 establishes a prescription drug benefit under
    Medicare (Medicare Part D) and a federal subsidy,
    which is tax-exempt, to sponsors of retiree health care benefit
    plans that provide a benefit that is actuarially equivalent to
    Medicare Part D. The Medicare Part D annualized
    reduction in net OPEB cost was $28 million for 2007
    and 2006. The reduction includes $7 million for the years
    ended December 31, 2007 and December 31, 2006 in
    capitalized OPEB costs.(b)
    
    We received $4 million in 2007 and $3 million in 2006
    for Medicare Part D Subsidy payments.(c)
    
    Liabilities for retirement benefits are $850 million
    non-current and $4 million current for year ended
    December 31, 2007 and $1.055 billion non-current and
    $4 million current for year ended December 31, 2006.    Years Ended December 31

2007


2006In MillionsPension ABO

$
1,231


$
1,240Fair value of pension plan assets


1,078



1,040Pension ABO in excess of Pension Plan assets

$
153


$
200  CMS-81




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  SFAS No. 158 Recognized:
  Pension & SERP


OPEBYears Ended December 31

2007


2006


2007


2006In MillionsRegulatory assetsNet loss

$
636


$
676


$
265


$
416Prior service cost (credit)


39



45



(89
)


(99
)AOCINet loss (gain)


46



46



(22
)


(11
)Prior service cost (credit)


3



4



(3
)


(4
)Total amounts recognized in regulatory assets and AOCL

$
724


$
771


$
151


$
302   Plan Assets:
  Pension


OPEBNovember 30

2007


2006


2007


2006Asset Category:Fixed Income


30
%


28
%


34
%


37
%Equity Securities


60
%


62
%


66
%


63
%Alternative Strategy


10
%


10
%






        CMS-82




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  SFAS No. 132(R) Benefit Payments:
  Pension


SERP


OPEB(a)In Millions2008

$
64


$
4


$
572009


71



4



602010


78



4



622011


88



4



652012


101



4



662013-2017


664



22



364     (a)
    
    OPEB benefit payments are net of employee contributions and
    expected Medicare Part D prescription drug subsidy
    payments. The subsidies to be received are estimated to be
    $6 million for 2008 and 2009, $7 million for 2010,
    $8 million for 2011 and 2012 and $50 million combined
    for 2013 through 2017. 8: ASSET
    RETIREMENT OBLIGATIONS  SFAS No. 143, Accounting for Asset Retirement
    Obligations:
    FASB Interpretation No. 47,Accounting for
    Conditional Asset Retirement Obligations:
 CMS-83




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    In ServiceARO Description

Date

Long-Lived AssetsDecember 31, 2007JHCampbell intake/discharge water line

1980

Plant intake/discharge water lineClosure of coal ash disposal areas

Various

Generating plants coal ash areasClosure of wells at gas storage fields

Various

Gas storage fieldsIndoor gas services equipment relocations

Various

Gas meters located inside structuresAsbestos abatement

1973

Electric and gas utility plantGas distribution cut, purge & cap

Various

Gas distribution mains & servicesNatural gas-fired power plant

1997

Gas fueled power plantClose gas treating plant and gas wells

Various

Gas transmission and storage     ARO














AROLiability











Cash flow


LiabilityARO Description

12/31/05


Incurred


Settled(a)


Accretion


Revisions


12/31/06In MillionsPalisades-decommission

$
375


$



$



$
26


$



$
401Big Rock-decommission


27







(28
)


3







2JHCampbell intake line






















Coal ash disposal areas


54







(2
)


5







57Wells at gas storage fields


1



















1Indoor gas services relocations


1



















1Asbestos abatement


36







(3
)


2







35Gas distribution cut, purge, cap






















Natural gas-fired power plant


1



















1Close gas treating plant and gas wells


1











1







2Total

$
496


$



$
(33
)

$
37


$



$
500
(b)   ARO














AROLiability











Cash flow


LiabilityARO Description

12/31/06


Incurred


Settled(a)


Accretion


Revisions


12/31/07In MillionsPalisades-decommission

$
401


$



$
(410
)

$
7


$
2


$
Big Rock-decommission


2







(3
)


1







JHCampbell intake line






















Coal ash disposal areas


57







(4
)


6







59Wells at gas storage fields


1



















1Indoor gas services relocations


1



















1Asbestos abatement


35







(1
)


2







36Gas distribution cut, purge, cap






101















101Natural gas-fired power plant


1







(1
)










Close gas treating plant and gas wells


2







(2
)










Total

$
500
(b)

$
101


$
(421
)

$
16


$
2


$
198     (a)
    
    Cash payments of $5 million in 2007 and $33 million in
    2006 are included in the Other current and non-current
    liabilities line in Net cash provided by operating activities in
    our Consolidated Statements of Cash Flows. In CMS-84




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  April 2007, we sold Palisades to Entergy and paid Entergy to
    assume ownership and responsibility for the Big Rock ISFSI. Our
    AROs related to Palisades and the Big Rock ISFSI ended with the
    sale, and we removed the related ARO liabilities from our
    Consolidated Balance Sheets. We also removed the Big Rock ARO
    related to the plant in the second quarter of 2007 due to the
    completion of decommissioning.(b)
    
    We reclassified $2 million in ARO liabilities to Noncurrent
    liabilities held for sale on our Consolidated Balance Sheets at
    December 31, 2006. These AROs were subsequently settled as
    a result of the sale of our businesses in Argentina and our
    northern Michigan non-utility natural gas assets to Lucid Energy. 9: INCOME
    TAXES          Years Ended December 31

2007


2006


2005(In Millions)Current income taxes:Federal

$
229


$
133


$
82Federal income tax benefit of operating loss carryforwards


(209
)


(31
)


(70
)State and local


1







(3
)Foreign






(2
)


$
21


$
100


$
9Deferred income taxes:Federal

$
(212
)

$
(281
)

$
(149
)Federal tax benefit of American Jobs Creation Act of 2004










(30
)State










Foreign






(3
)


3$
(212
)

$
(284
)

$
(176
)Deferred ITC, net


(4
)


(4
)


(13
)Tax benefit

$
(195
)

$
(188
)

$
(180
)  CMS-85




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        December 31

2007


2006(In Millions)Current Assets and (Liabilities):Tax loss and credit carryforwards

$



$
150Deferred charges


107



44Employee benefits


8



10Other


48



Current Assets

$
163


$
204Gas inventory


(204
)


Other






(49
)Current Liabilities

$
(204
)

$
(49
)Net Current Asset/(Liability)

$
(41
)

$
155Noncurrent Assets and (Liabilities):Tax loss and credit carryforwards

$
761


$
717SFAS No. 109 regulatory liability


207



189Reserves and accruals


92



Currency translation adjustment


77



159Foreign investments inflation indexing


23



42Nuclear decommissioning (including unrecovered costs)






57Employee benefits


64



28Other






Noncurrent Assets

$
1,224


$
1,192Valuation allowance


(32
)


(72
)Net Noncurrent Asset

$
1,192


$
1,120Property

$
(840
)

$
(790
)Securitized costs


(180
)


(177
)Gas inventory






(168
)Nuclear decommisioning (including unrecovered costs)


(18
)


Other


(55
)


(108
)Noncurrent Liabilities

$
(1,093
)

$
(1,243
)Net Noncurrent Asset/(Liability)

$
99


$
(123
)  CMS-86




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Years Ended December 31

2007


2006


2005(In Millions)Income (loss) from continuing operations before income taxesDomestic

$
(124
)

$
(118
)

$
(451
)Foreign


(197
)


(203
)


130Total


(321
)


(321
)


(321
)Statutory federal income tax rate


x 35
%


x 35
%


x 35
%Expected income tax expense (benefit)


(112
)


(112
)


(112
)Increase (decrease) in taxes from:Property differences


9



13



18Income tax effect of foreign investments


47



(29
)


(32
)AJCA foreign dividends benefit










(30
)ITC amortization


(4
)


(4
)


(4
)State and local income taxes, net of federal benefit










(2
)Medicare Part D exempt income


(10
)


(10
)


(6
)Tax exempt income


(1
)


(3
)


(3
)Tax contingency reserves






(15
)


(5
)Valuation allowance


(121
)


23



IRS Settlement/Credit Restoration






(49
)


Other, net


(3
)


(2
)


(4
)Recorded income tax benefit

$
(195
)

$
(188
)

$
(180
)Effective tax rate


60.7
%


58.6
%


56.1
%        CMS-87




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Accounting for Uncertainty in
    Income Taxes
    (In Millions)Balance at January 1, 2007

$
151Reductions for prior year tax positions


(101
)Additions for prior year tax positions


1Additions for current year tax positions


Statute lapses


Settlements


Balance at December 31, 2007

$
51       Michigan Business Tax Act: 15-year
 10: STOCK
    BASED COMPENSATION     CMS-88




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
          Weighted-AverageNumber of


Grant DateRestricted Stock

Shares


Fair ValueNonvested at December 31, 2006


1,902,438


$
12.10Granted(a)


721,870


$
14.18Vested(a)


(923,329
)

$
16.21Forfeited


(19,525
)

$
13.41Nonvested at December 31, 2007


1,681,454


$
13.52     (a)
    
    During 2007, we granted 411,600 TSR shares and 105,020
    time-lapse shares of restricted stock. In addition, we granted
    205,250 shares that immediately vested as a result of
    achieving 150 percent of the market conditions on our 2004
    TSR restricted stock grant. The fair value at the date of grant
    in 2004 was $9.73. We excluded the impact of these shares from
    the weighted-average grant date fair value for the
    2007 shares granted.    2007


2006


2005Expected Volatility


19.11
%


20.51
%


48.70
%Expected Dividend Yield


1.20
%


0.00
%


0.00
%Risk-free rate


4.59
%


4.82
%


4.14
%    CMS-89




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      OptionsOutstanding,Fully Vested,





Weighted-Average


Aggregateand


Weighted-Average


Remaining


IntrinsicStock Options

Exercisable


Exercise Price


Contractual Term


Value(In millions)Outstanding at December 31, 2006


2,913,270


$
20.29



4.7 years


$
(10
)Granted






Exercised


(900,400
)

$
8.14Cancelled or Expired


(798,965
)

$
32.14Outstanding at December 31, 2007


1,213,905


$
21.51



3.8 years


$
(5
)         Years Ended December 31

2007

2006

2005Weighted average grant date fair valueRestricted stock granted

$
14.18


$
13.84


$
15.61Stock options granted(a)










     (a)
    
    No stock options were granted in 2007, 2006, or 2005.   11: LEASES       CMS-90




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Years Ended December 31

2007


2006


2005(In Millions)Capital lease expense

$
34


$
15


$
14Operating lease expense


23



19



18Income from subleases


(2
)


(2
)


(2
)     Capital


FinanceLeases


Lease(b)


Operating(In Millions)2008

$
21


$
13


$
262009


16



13



242010


15



13



212011


13



13



212012


14



13



212013 and thereafter


53



122



94Total minimum lease payments(a)


132



187


$
207Less imputed interest


64



Present value of net minimum lease payments


68



187Less current portion


17



13Non-current portion

$
51


$
174     (a)
    
    Minimum payments have not been reduced by minimum sublease
    rentals of $3 million due in the future under noncancelable
    subleases.(b)
    
    In April 2007, we sold Palisades to Entergy and entered into a
    15-year
    power purchase agreement to buy all of the capacity and energy
    produced by Palisades, up to the annual average capacity of
    798 MW. We provided $30 million in security to Entergy
    for our power purchase agreement obligation in the form of a
    letter of credit. We estimate that capacity and energy payments
    under the Palisades power purchase agreement will average
    $300 million annually. Our total purchases of capacity and
    energy under the Palisades power purchase agreement were
    $180 million in 2007.   CMS-91




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   12: PROPERTY,
    PLANT, AND EQUIPMENT    EstimatedDepreciableDecember 31

Life in Years


2007


2006(In Millions)Electric:Generation


13-85


$
3,328


$
3,573Distribution


12-75



4,496



4,425Other


7-40



438



421Capital and finance leases(a)






293



85Gas:Underground storage facilities(b)


30-65



267



263Transmission


15-75



570



465Distribution


40-75



2,286



2,216Other


7-50



320



300Capital leases(a)






24



29Enterprises:IPP


3-40



378



415CMS Gas Transmission


3-40







25CMS Electric and Gas


2-30



2



2Other


4-25



11



11Other:


7-71



34



33Construction
    work-in-progress






447



639Less accumulated depreciation, depletion, and amortization(c)






4,166



5,194Net property, plant, and equipment(d)





$
8,728


$
7,708     (a)
    
    Capital and finance leases presented in this table are gross
    amounts. Accumulated amortization of capital and finance leases
    was $62 million at December 31, 2007 and
    $59 million at December 31, 2006. Additions were
    $229 million during 2007, which includes $197 million
    related to assets under the Palisades finance lease. Retirements
    and adjustments were $26 million during 2007. Additions
    were $7 million and Retirements and adjustments were
    $6 million during 2006.(b)
    
    Includes unrecoverable base natural gas in underground storage
    of $26 million at December 31, 2007 and
    December 31, 2006, which is not subject to depreciation.(c)
    
    At December 31, 2007, accumulated depreciation, depletion,
    and amortization included $3.992 billion from our utility
    plant assets and $174 million from other plant assets. At
    December 31, 2006, accumulated depreciation, depletion, and
    amortization included $5.017 billion from our utility plant
    assets and $177 million from other plant assets. CMS-92




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   (d)
    
    At December 31, 2007, utility plant additions, including
    capital leases, were $1.303 billion and utility plant
    retirements, including other plant adjustments, were
    $1.094 billion. At December 31, 2006, utility plant
    additions were $470 million and utility plant retirements,
    including other plant adjustments, were $82 million.    Amortization


2007


2006December 31

Life in





Accumulated





AccumulatedDescription

years


Gross Cost


Amortization


Gross Cost


AmortizationIn MillionsSoftware development


7-15


$
207


$
170


$
204


$
153Rights of way


50-75



116



32



114



31Leasehold improvements


various



19



16



19



15Franchises and consents


various



14



5



19



10Other intangibles


various



20



14



23



14Total





$
376


$
237


$
379


$
223     Asset Acquisition:
 13: EQUITY
    METHOD INVESTMENTS    Form 10-K.
   CMS-93




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Income
    Statement Data
  Year EndedDecember 31, 2007Total(b)(In Millions)Operating revenue

$
598Operating expenses


448Operating income


150Other expense, net


69Net income

$
81   Year EndedDecember 31, 2006JorfLasfar(a)


Total(b)(In Millions)Operating revenue

$
482


$
2,093Operating expenses


317



1,600Operating income


165



493Other expense, net


57



252Net income

$
108


$
241   Year EndedDecember 31, 2005JorfLasfar(a)


Total(b)(In Millions)Operating revenue

$
508


$
2,058Operating expenses


340



1,530Operating income


168



528Other expense, net


56



243Net income

$
112


$
285  CMS-94




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Balance
    Sheet Data
  December 31, 2007Total(b)(In Millions)AssetsCurrent assets

$
7Property, plant and equipment, net


6Other assets


177$
190LiabilitiesCurrent liabilities

$
4Long-term debt and other non-current liabilities


Equity


186$
190   December 31, 2006JorfLasfar(a)


Total(b)AssetsCurrent assets

$
239


$
794Property, plant and equipment, net


15



2,946Other assets


1,047



1,527$
1,301


$
5,267LiabilitiesCurrent liabilities

$
272


$
818Long-term debt and other non-current liabilities


403



3,124Equity


626



1,325$
1,301


$
5,267     (a)
    
    We sold our investment in Jorf Lasfar in 2007. At
    December 31, 2006 our investment in Jorf Lasfar was
    $313 million. Our share of net income from Jorf Lasfar was
    $16 million for the period January 1, 2007 through
    May 1, 2007, $54 million for the year ended
    December 31, 2006, and $56 million for the year ended
    December 31, 2005.(b)
    
    Amounts include financial data from our international equity
    method investments through the date of sale. CMS-95




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  14: JOINTLY
    OWNED REGULATED UTILITY FACILITIES    Ownership








Accumulated


ConstructionShare


Net Investment(a)


Depreciation


Work in ProgressDecember 31

(%)


2007


2006


2007


2006


2007


2006(In Millions)Campbell Unit 3


93.3


$
664


$
262


$
337


$
370


$
44


$
353Ludington


51.0



65



68



104



95



1



1Distribution


Various



89



98



44



47



5



4     (a)
    
    Net investment is the amount of utility plant in service less
    accumulated depreciation.   15: REPORTABLE
    SEGMENTS    
    electric utility, consisting of regulated activities associated
    with the generation and distribution of electricity in Michigan
    through our subsidiary, Consumers,
    gas utility, consisting of regulated activities associated with
    the transportation, storage, and distribution of natural gas in
    Michigan through our subsidiary, Consumers, and
    enterprises, consisting of various subsidiaries engaging
    primarily in domestic independent power production.     CMS-96




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Years Ended December 31

2007


2006


2005(In Millions)Operating RevenuesElectric utility

$
3,443


$
3,302


$
2,695Gas utility


2,621



2,373



2,483Enterprises


383



438



693Other


17



13



8$
6,464


$
6,126


$
5,879Earnings from Equity Method InvesteesEnterprises

$
39


$
87


$
124Other


1



2



1$
40


$
89


$
125Depreciation, Depletion, and AmortizationElectric utility

$
397


$
380


$
292Gas utility


127



122



117Enterprises


12



44



93Other


4



4



2$
540


$
550


$
504Interest ChargesElectric utility

$
192


$
164


$
132Gas utility


69



73



68Enterprises


9



66



69Other


168



177



194$
438


$
480


$
463Income Tax Expense (Benefit)Electric utility

$
100


$
95


$
85Gas utility


47



18



39Enterprises


(183
)


(145
)


(203
)Other


(159
)


(156
)


(101
)$
(195
)

$
(188
)

$
(180
)Net Income (Loss) Available to Common StockholdersElectric utility

$
196


$
199


$
153Gas utility


87



37



48Enterprises


(391
)


(227
)


(217
)Discontinued operations(a)


(89
)


54



57Other


(30
)


(153
)


(135
)$
(227
)

$
(90
)

$
(94
)   CMS-97




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Years Ended December 31

2007


2006


2005(In Millions)Investments in equity method investeesEnterprises

$
6


$
556


$
698Other


5



10



13$
11


$
566


$
711Total AssetsElectric utility(b)

$
8,492


$
8,516


$
7,755Gas utility(b)


4,102



3,950



3,609Enterprises


986



1,947



3,616Other


616



958



1,061$
14,196


$
15,371


$
16,041Capital Expenditures(c)Electric utility

$
1,319


$
462


$
384Gas utility


168



172



168Enterprises


5



42



50Other






1



3$
1,492


$
677


$
605   Geographic
    Areas(d)
  2007


2006


2005(In Millions)United StatesOperating revenue

$
6,462


$
6,123


$
5,877Operating income (loss)


151



85



(468
)Total Assets

$
14,191


$
14,123


$
14,675InternationalOperating revenue

$
2


$
3


$
2Operating income (loss)


(150
)


(139
)


123Total Assets

$
5


$
1,248


$
1,366     (a)
    
    Amounts include an income tax benefit of $1 million for
    December 31, 2007, and income tax expense of
    $32 million for December 31, 2006 and $20 million
    for December 31, 2005.(b)
    
    Amounts include a portion of Consumers other common assets
    attributable to both the electric and gas utility businesses.(c)
    
    Amounts include purchase of nuclear fuel and capital lease
    additions. Amounts also include a portion of Consumers
    capital expenditures for plant and equipment attributable to
    both the electric and gas utility businesses.(d)
    
    Revenues are based on the country location of customers. CMS-98




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  16: CONSOLIDATION
    OF VARIABLE INTEREST ENTITIES    
    T.E.S. Filer City Station Limited Partnership,
    Grayling Generating Station Limited Partnership, and
    Genesee Power Station Limited Partnership.   17: QUARTERLY
    FINANCIAL AND COMMON STOCK INFORMATION (UNAUDITED)  2007Quarters Ended

March 31


June 30


Sept. 30


Dec. 31(d)(In Millions, Except Per Share Amounts)Operating revenue

$
2,189


$
1,319


$
1,282


$
1,674Operating income (loss)


(24
)


7



212



(194
)Income (loss) from continuing operations


(33
)


(55
)


84



(122
)Income (loss) from discontinued operations(a)


(178
)


91







(2
)Net income (loss)


(211
)


36



84



(124
)Preferred dividends


3



3



2



3Redemption premium on preferred stock


1











Net income (loss) available to common stockholders


(215
)


33



82



(127
)Income (loss) from continuing operations per average common
    share  basic


(0.17
)


(0.26
)


0.37



(0.56
)Income (loss) from continuing operations per average common
    share  diluted


(0.17
)


(0.26
)


0.34



(0.56
)Basic earnings (loss) per average common share(b)


(0.97
)


0.15



0.37



(0.57
)Diluted earnings (loss) per average common share(b)


(0.97
)


0.15



0.34



(0.57
)Common stock prices(c)High


18.21



18.93



17.90



17.91Low


16.00



16.78



15.48



16.06   CMS-99




---



##### 



CMS ENERGY
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  2006Quarters Ended

March 31


June 30


Sept. 30


Dec. 31(e)(In Millions, Except Per Share Amounts)Operating revenue

$
1,897


$
1,219


$
1,288


$
1,722Operating income (loss)


(21
)


69



(27
)


(75
)Income (loss) from continuing operations


(33
)


63



(112
)


(51
)Income from discontinued operations(a)


9



12



11



22Net income (loss)


(24
)


75



(101
)


(29
)Preferred dividends


3



3



2



3Net income (loss) available to common stockholders


(27
)


72



(103
)


(32
)Income (loss) from continuing operations per average common
    share  basic


(0.16
)


0.27



(0.52
)


(0.25
)Income (loss) from continuing operations per average common
    share  diluted


(0.16
)


0.26



(0.52
)


(0.25
)Basic earnings (loss) per average common share(b)


(0.12
)


0.33



(0.47
)


(0.15
)Diluted earnings (loss) per average common share(b)


(0.12
)


0.31



(0.47
)


(0.15
)Common stock prices(c)High


15.22



13.66



14.79



16.95Low


12.95



12.46



12.92



14.55     (a)
    
    Net of tax.(b)
    
    Sum of the quarters may not equal the annual loss per share due
    to changes in shares outstanding.(c)
    
    Based on New York Stock Exchange composite transactions.(d)
    
    The quarter ended December 31, 2007, includes a
    $181 million net after-tax charge resulting from an
    electricity sales agreement termination. For additional details,
    see Note 3, Contingencies  Other
    Contingencies.(e)
    
    The quarter ended December 31, 2006 includes a
    $41 million net loss on the sale of our investment in the
    MCV Partnership, including the associated asset impairment
    charge. The quarter also includes an $80 million net
    after-tax charge resulting from our agreement to settle
    shareholder class action lawsuits. For additional details, see
    Note 2, Asset Sales, Discontinued Operations and Impairment
    Charges and Note 3, Contingencies. CMS-100




---



##### 



Report of
    Independent Registered Public Accounting Firm    Internal Control  Integrated
    Framework
        /s/  PricewaterhouseCoopers
    LLP    CMS-101




---



##### 



Report of
    Independent Registered Public Accounting Firm
       /s/  PricewaterhouseCoopers
    LLP    CMS-102




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   The Board of
    Directors and Stockholders of CMS Energy Corporation
                CMS-103




---



##### 



2007 CONSOLIDATED
    FINANCIAL STATEMENTS
  CE-1




---



##### 



CONSUMERS ENERGY
    COMPANY
  SELECTED FINANCIAL
    INFORMATION
  2007


2006


2005


2004


2003Operating revenue (in millions)

($

)


6,064



5,721



5,232



4,711



4,435Earnings from equity method investees (in millions)

($

)






1



1



1



42Income (loss) before cumulative effect of change in accounting
    principle (in millions)

($

)


312



186



(96
)


280



196Cumulative effect of change in accounting (in millions)

($

)














(1
)


Net income (loss) (in millions)

($

)


312



186



(96
)


279



196Net income (loss) available to common stockholder (in millions)

($

)


310



184



(98
)


277



194Cash provided by operations (in millions)

($

)


442



473



639



595



5Capital expenditures, excluding capital lease additions (in
    millions)

($

)


1,258



646



572



508



486Total assets (in millions)(a)

($

)


13,401



12,845



13,178



12,811



10,745Long-term debt, excluding current portion (in millions)(a)

($

)


3,692



4,127



4,303



4,000



3,583Long-term debt  related parties, excluding current
    portion (in millions)

($

)














326



506Non-current portion of capital and finance lease obligations (in
    millions)

($

)


225



42



308



315



58Total preferred stock (in millions)

($

)


44



44



44



44



44Number of preferred shareholders at year-end






1,641



1,728



1,823



1,931



2,032Book value per common share at year-end

($

)


43.37



35.17



33.03



28.68



24.51Number of full-time equivalent employees at year-end






7,614



8,026



8,114



8,050



7,947Electric statisticsSales (billions of kWh)






39



38



39



38



38Customers (in thousands)






1,799



1,797



1,789



1,772



1,754Average sales rate per kWh


(c
)


8.65



8.46



6.73



6.88



6.91Gas Utility StatisticsSales and transportation deliveries (bcf)






340



309



350



385



380Customers (in thousands)(b)






1,710



1,714



1,708



1,691



1,671Average sales rate per mcf

($

)


10.66



10.44



9.61



8.04



6.72     (a)
    
    Until their sale in November 2006 , we were the primary
    beneficiary of both the MCV Partnership and the FMLP. As a
    result, we consolidated their assets, liabilities and activities
    into our consolidated financial statements as of and for the
    years ended December 31, 2005 and 2004. These partnerships
    had third party obligations totaling $482 million at
    December 31, 2005 and $582 million at
    December 31, 2004. Property, plant and equipment serving as
    collateral for these obligations had a carrying value of
    $224 million at December 31, 2005 and
    $1.426 billion at December 31, 2004.(b)
    
    Excludes off-system transportation customers. CE-2




---



##### 



Consumers
    Energy Company
  Consumers Energy
    Company
  Managements
    Discussion and Analysis
   FORWARD-LOOKING
    STATEMENTS AND INFORMATION  Form 10-K
  
    the price of CMS Energy Common Stock, capital and financial
    market conditions, and the effect of such market conditions on
    the Pension Plan, interest rates, and access to the capital
    markets, including availability of financing to Consumers, CMS
    Energy, or any of their affiliates, and the energy industry,
    market perception of the energy industry, Consumers, CMS Energy,
    or any of their affiliates,
    factors affecting utility and diversified energy operations,
    such as unusual weather conditions, catastrophic weather-related
    damage, unscheduled generation outages, maintenance or repairs,
    environmental incidents, or electric transmission or gas
    pipeline system constraints,
    the impact of any future regulations or laws regarding carbon
    dioxide and other greenhouse gas emissions,
    national, regional, and local economic, competitive, and
    regulatory policies, conditions and developments,
    adverse regulatory or legal decisions, including those related
    to environmental laws and regulations, and potential
    environmental remediation costs associated with such decisions,
    potentially adverse regulatory treatment or failure to receive
    timely regulatory orders concerning a number of significant
    questions currently or potentially before the MPSC, including:  
    recovery of Clean Air Act capital and operating costs and other
    environmental and safety-related expenditures,
    recovery of power supply and natural gas supply costs,
    timely recognition in rates of additional equity investments and
    additional operation and maintenance expenses at Consumers,
    adequate and timely recovery of additional electric and gas
    rate-based investments,
    adequate and timely recovery of higher MISO energy and
    transmission costs,
    recovery of Stranded Costs incurred due to customers choosing
    alternative energy suppliers,
    timely recovery of costs associated with energy efficiency
    investments and any state or federally mandated renewables
    resource standard,
    recovery of Palisades sale related costs,
    approval of the Balanced Energy Initiative, and CE-3




---



##### 



Consumers
    Energy Company
   
    authorization of a new clean coal plant.  
    the effects on our ability to purchase capacity to serve our
    customers and fully recover the cost of these purchases, if the
    owners of the MCV Facility exercise their right to terminate the
    MCV PPA,
    our ability to prevail in the exercise of our regulatory out
    rights under the MCV PPA,
    our ability to recover Big Rock decommissioning funding
    shortfalls and nuclear fuel storage costs due to the DOEs
    failure to accept spent nuclear fuel on schedule, including the
    outcome of pending litigation with the DOE,
    federal regulation of electric sales and transmission of
    electricity, including periodic re-examination by federal
    regulators of our market-based sales authorizations in wholesale
    power markets without price restrictions,
    energy markets, including availability of capacity and the
    timing and extent of changes in commodity prices for oil, coal,
    natural gas, natural gas liquids, electricity and certain
    related products due to lower or higher demand, shortages,
    transportation problems, or other developments,
    our ability to collect accounts receivable from our customers,
    earnings volatility resulting from the GAAP requirement that we
    apply mark-to-market accounting on certain energy commodity
    contracts and interest rate swaps,
    the effect on our utility and utility revenues of the direct and
    indirect impacts of the continued economic downturn in Michigan,
    potential disruption or interruption of facilities or operations
    due to accidents, war, or terrorism, and the ability to obtain
    or maintain insurance coverage for such events,
    technological developments in energy production, delivery, and
    usage,
    achievement of capital expenditure and operating expense goals,
    changes in financial or regulatory accounting principles or
    policies,
    changes in tax laws or new IRS interpretations of existing or
    past tax laws,
    changes in federal or state regulations or laws that could have
    an impact on our business,
    the outcome, cost, and other effects of legal or administrative
    proceedings, settlements, investigations or claims,
    disruptions in the normal commercial insurance and surety bond
    markets that may increase costs or reduce traditional insurance
    coverage, particularly terrorism and sabotage insurance,
    performance bonds, and tax exempt debt insurance,
    credit ratings of Consumers or CMS Energy, and
    other business or investment considerations that may be
    disclosed from time to time in Consumers or CMS
    Energys SEC filings, or in other publicly issued written
    documents.   EXECUTIVE
    OVERVIEW   CE-4




---



##### 



Consumers
    Energy Company
      
    weather, especially during the normal heating and cooling
    seasons,
    economic conditions,
    regulation and regulatory issues,
    energy commodity prices,
    interest rates, and
    our debt credit rating.    15-year
          
    investing in our utility system to enable us to meet our
    customer commitments, comply with increasing environmental
    performance standards, improve system performance, and maintain
    adequate supply and capacity,
    growing earnings while controlling operating and fuel costs,
    managing cash flow issues, and CE-5




---



##### 



Consumers
    Energy Company
   
    maintaining principles of safe, efficient operations, customer
    value, fair and timely regulation, and consistent financial
    performance.   RESULTS
    OF OPERATIONS  Net
    Income (Loss) Available to Common Stockholder
  Years Ended December 31

2007


2006


Change


2006


2005


ChangeIn MillionsElectric

$
196


$
199


$
(3
)

$
199


$
153



46Gas


87



37



50



37



48



(11
)Other (Includes The MCV Partnership interest)


27



(52
)


79



(52
)


(299
)


247Net Income (Loss) Available to Common Stockholder

$
310


$
184


$
126


$
184


$
(98
)

$
282       In Millions

lower operating and maintenance costs primarily due to the sale
    of Palisades in April 2007,

$
82

decrease in losses from our ownership interest in the MCV
    Partnership primarily due to the absence, in 2007, of
    mark-to-market losses on certain long-term gas contracts and
    financial hedges,


60

increase in gas delivery revenue primarily due to the
    MPSCs November 2006 and August 2007 gas rate orders,


47

decrease in other income tax adjustments primarily due to higher
    expected utilization of capital loss carryforwards,


14

increase in electric revenue primarily due to favorable weather
    and higher surcharge revenue,


16

increase in gas delivery revenue primarily due to colder weather,


12

decrease due to electric revenue being used to offset costs
    incurred under our power purchase agreement with Entergy,


(88
)

increase in general taxes, primarily due to higher property tax
    expense,


(14
)

increase in interest charges, and


(7
)

other net increases to income.


4Total change

$
126  CE-6




---



##### 



Consumers
    Energy Company
      In Millions

the net impact of activities associated with the MCV Partnership
    as the absence of a 2005 impairment charge and improved
    operations in 2006 more than offset the negative effects of
    mark-to-market activity and charges related to the sale of our
    interest in the MCV Partnership,

$
225

increase in electric delivery revenue primarily due to a
    December 2005 electric rate order,


165

increase in earnings due to the expiration of rate caps that, in
    2005, would not allow us to recover fully our power supply costs
    from our residential customers,


37

increase in gas wholesale and retail services and other gas
    revenue associated with pipeline capacity optimization,


16

increase in return on electric utility capital expenditures in
    excess of depreciation base as allowed by the Customer Choice
    Act,


14

decrease in income taxes primarily due to an IRS audit
    settlement,


14

increase in operating expenses primarily due to higher
    depreciation and amortization expense, higher electric
    maintenance expense, and higher customer service expense,


(101
)

decrease in gas delivery revenue primarily due to lower,
    weather-driven sales,


(31
)

increase in operating expenses primarily due to costs related to
    a planned refueling outage at our Palisades nuclear plant,


(29
)

increase in interest charges, and


(20
)

increase in general tax expense, primarily due to higher
    property tax expense.


(8
)Total change

$
282  CE-7




---



##### 



Consumers
    Energy Company
  Electric
    Utility Results of Operations
  Years Ended December 31

2007


2006


Change


2006


2005


ChangeIn MillionsNet income

$
196


$
199


$
(3
)

$
199


$
153


$
46Reasons for the change:Electric deliveries









$
18










$
193Surcharge revenue










6











61Palisades revenue to PSCR










(136
)










Power supply costs and related revenue










(17
)










57Other operating expenses, other income, and non-commodity revenue










159











(236
)Regulatory return on capital expenditures










5











22General taxes










(15
)










(7
)Interest charges










(18
)










(34
)Income taxes










(5
)










(10
)Total change









$
(3
)









$
46   Electric deliveries:
    Surcharge revenue:
    Palisades revenue to PSCR:
  Power supply costs and related revenue:
 CE-8




---



##### 



Consumers
    Energy Company
      Other operating expenses, other income, and non-commodity
    revenue:
        Regulatory return on capital expenditures:
    General taxes:
    Interest charges:
   CE-9




---



##### 



Consumers
    Energy Company
  Income taxes:
    Gas
    Utility Results of Operations
  Years Ended December 31

2007


2006


Change


2006


2005


ChangeIn MillionsNet income

$
87


$
37


$
50


$
37


$
48


$
(11
)Reasons for the change:Gas deliveries









$
10










$
(61
)Gas rate increase










81











14Gas wholesale and retail services, other gas revenues, and other
    income










14











24Other operating expenses










(19
)










7General taxes and depreciation










(11
)










(10
)Interest charges










4











(6
)Income taxes










(29
)










21Total change









$
50










$
(11
)   Gas deliveries:
    Gas rate increase:
    Gas wholesale and retail services, other gas revenues, and
    other income:
   CE-10




---



##### 



Consumers
    Energy Company
  Other operating expenses:
    General taxes and depreciation:
    Interest charges:
    Income taxes:
    Other
    Nonutility Results of Operations
  Years Ended December 31

2007

2006

Change

2006

2005

ChangeIn MillionsNet income (loss)

$
27


$
(52
)

$
79


$
(52
)

$
(299
)

$
247      CE-11




---



##### 



Consumers
    Energy Company
  CRITICAL
    ACCOUNTING POLICIES    Use
    of Estimates and Assumptions
    Contingencies:
  Long-Lived Assets and Investments:
  
    the nature of the assets,
    projected future economic benefits,
    regulatory and political environments,
    historical and future cash flow and profitability
    measurements, and
    other external market conditions and factors.    Accounting
    for the Effects of Industry Regulation
       CE-12




---



##### 



Consumers
    Energy Company
    Accounting
    for Financial and Derivative Instruments and Market Risk
    Information
  Financial Instruments:
  Derivative Instruments:
      
    they do not have a notional amount (that is, a number of units
    specified in a derivative instrument, such as MWh of electricity
    or bcf of natural gas),
    they qualify for the normal purchases and sales
    exception, or
    there is not an active market for the commodity.    Market Risk Information:
     CE-13




---



##### 



Consumers
    Energy Company
    Interest Rate Risk:
    December 31

2007

2006In MillionsVariable-rate financing  before tax annual earnings
    exposure

$
1


$
3Fixed-rate financing  potential reductionin
    fair value(a)


116



134   (a)
    Fair value reduction could only be realized if we transferred
    all of our fixed-rate financing to other creditors.    Commodity Price Risk:
  Investment Securities Price Risk:
    December 31

2007

2006In MillionsPotential reductionin fair value of available-for-sale
    equity securities (SERP investments and investment in CMS Energy
    common stock)

$
7


$
6     Pension
    and OPEB
  Pension:
  401(k):
 CE-14




---



##### 



Consumers
    Energy Company
    OPEB:
    
    life expectancies,
    present-value discount rates,
    expected long-term rate of return on plan assets,
    rate of compensation increases, and
    anticipated health care costs.      Expected Costs

Pension Cost


OPEB Cost


ContributionsIn Millions2008

$
103


$
29


$
482009


109



28



482010


112



26



129         Accounting
    For Asset Retirement Obligations
     CE-15




---



##### 



Consumers
    Energy Company
    Related
    Party Transactions
    
    purchase and sale of electricity from and to Enterprises,
    payment of parent company overhead costs to CMS Energy, and
    investment in CMS Energy Common Stock.     Capital
    Resources and Liquidity    
    results of operations,
    capital expenditures,
    energy commodity and transportation costs,
    contractual obligations,
    regulatory decisions,
    debt maturities,
    credit ratings,
    working capital needs, and
    collateral requirements.        
    our current level of cash and revolving credit facilities,
    our anticipated cash flows from operating and investing
    activities, and
    our ability to access secured and unsecured borrowing capacity
    in the capital markets, if necessary.   CE-16




---



##### 



Consumers
    Energy Company
   Cash
    Position, Investing, and Financing
    Summary
    of Cash Flows:
  2007


2006


2005In MillionsNet cash provided by (used in):Operating activities

$
442


$
473


$
639Investing activities


(585
)


(672
)


(661
)Net cash used in operating and investing activities


(143
)


(199
)


(22
)Financing activities


301



(180
)


267Net Increase (Decrease) in Cash and Cash Equivalents

$
158


$
(379
)

$
245   Operating
    Activities:
  2007:
  
    the absence, in 2007, of the sale of accounts receivable,
    a payment to fund our Pension Plan,
    refunds to customers of excess Palisades decommissioning
    funds, and
    other timing differences.    
    the absence, in 2007, of tax payments made to the parent related
    to the 2006 IRS income tax audit,
    the absence of the release of the MCV Partnership gas supplier
    funds on deposit due to the sale of our interest in the MCV
    Partnership in 2006, and
    a decrease in expenditures for gas inventory as the milder
    winter in 2006 allowed us to accumulate more gas in our storage
    facilities.    2006:
  
    decreases in the MCV Partnership gas supplier funds on deposit
    resulting in refunds to suppliers from decreased exposure to
    declining gas prices in 2006,
    income tax payments to the parent related to the 2006 IRS income
    tax audit, and
    decreases in accounts payable mainly due to payments for
    higher-priced gas that were accrued at December 31, 2005.    
    a decrease in accounts receivable due to the collection of
    receivables in 2006 reflecting higher gas prices billed during
    the latter part of 2005 and reduced billings in the latter part
    of 2006 due to milder weather, and
    reduced inventory purchases.  Investing
    Activities:
  2007:
 CE-17




---



##### 



Consumers
    Energy Company
    2006:
  Financing
    Activities:
  2007:
  2006:
    Obligations
    and Commitments
  Contractual Obligations:
  Payments DueContractual Obligations




Less Than


One to


Three to


More Thanat December 31, 2007

Total


One Year


Three Years


Five Years


Five YearsIn MillionsLong-term debt(a)

$
4,132


$
440


$
727


$
376


$
2,589Interest payments on long-term debt(b)


1,712



198



342



298



874Capital and finance leases(c)


255



30



48



44



133Interest payments on capital and finance leases(d)


139



14



27



24



74Operating leases(e)


204



25



44



42



93Purchase obligations(f)


21,286



2,502



2,897



2,275



13,612Purchase obligations  related parties(f)


1,492



78



154



154



1,106Total contractual obligations

$
29,220


$
3,287


$
4,239


$
3,213


$
18,481    (a)
    
    Principal amounts due on outstanding debt obligations, current
    and long-term, at December 31, 2007. For additional details
    on long-term debt, see Note 4, Financings and
    Capitalization.(b)
    
    Currently scheduled interest payments on both variable and fixed
    rate long-term debt, current and long-term. Variable interest
    payments are based on contractual rates in effect at
    December 31, 2007.(c)
    
    Principal portion of lease payments under our capital and
    finance leases, comprised mainly of leased service vehicles,
    leased office furniture, and certain power purchase agreements.(d)
    
    Imputed interest on the capital leases.(e)
    
    Minimum noncancelable lease payments under our leases of
    railroad cars, certain vehicles, and miscellaneous office
    buildings and equipment, which are accounted for as operating
    leases. CE-18




---



##### 



Consumers
    Energy Company
   (f)
    
    Long-term contracts for purchase of commodities and services.
    These obligations include operating contracts used to assure
    adequate supply with generating facilities that meet PURPA
    requirements. These commodities and services include:  
    natural gas and associated transportation,
    electricity, and
    coal and associated transportation.    Revolving Credit Facilities:
  Dividend Restrictions:
  Off-Balance Sheet Arrangements: .
  Sale of Accounts Receivable:
  Capital Expenditures:
  Years Ending December 31

2008


2009


2010In MillionsConstruction

$
523


$
589


$
575Clean Air(a)


112



135



94Cost of Removal


44



56



48New Customers


83



84



116Other(b)


156



116



182Total

$
918


$
980


$
1,015Electric utility operations(a)(b)

$
684


$
717


$
783Gas utility operations(b)


234



263



232Total

$
918


$
980


$
1,015    (a)
    
    These amounts include estimates for capital expenditures that
    may be required by revisions to the Clean Air Acts
    national air quality standards or potential renewable energy
    programs.(b)
    
    These amounts include estimates for capital expenditures related
    to information technology projects, facility improvements, and
    vehicle leasing. CE-19




---



##### 



Consumers
    Energy Company
  OUTLOOK  Corporate
    Outlook
    ELECTRIC BUSINESS
    OUTLOOK
  Growth:
    
    energy conservation measures,
    fluctuations in weather conditions, and
    changes in economic conditions, including utilization and
    expansion or contraction of manufacturing facilities.  Electric Customer Revenue Outlook:
  Electric Reserve Margin:
    Electric Transmission Expenses:
   CE-20




---



##### 



Consumers
    Energy Company
    21st Century Electric Energy Plan:
  Balanced Energy Initiative:
      Proposed Energy Legislation:
  Power Plant Purchase:
  ELECTRIC BUSINESS
    UNCERTAINTIES
    Electric Environmental Estimates:
  Clean Air Act:
 CE-21




---



##### 



Consumers
    Energy Company
  Clean Air Interstate Rule:
  
    operating our selective catalytic reduction control technology
    units throughout the year,
    completing the installation of a fourth selective catalytic
    reduction control unit,
    installing low nitrogen oxides burners, and
    purchasing emission allowances.    
    construction commodity prices, especially construction material
    and labor,
    project completion schedules and spending plans,
    cost escalation factor used to estimate future years costs
    of 3.2 percent, and
    an AFUDC capitalization rate of 7.9 percent.      State and Federal Mercury Air Rules:
      Phase I

Phase IIProposed State Mercury Rule

30% reduction by 2010

90% reduction by 2015   Routine Maintenance Classification:
 CE-22




---



##### 



Consumers
    Energy Company
  Greenhouse Gases:
    Water:
    Electric ROA:
    Electric Rate Case:
    The MCV PPA: 35-year
   CE-23




---



##### 



Consumers
    Energy Company
      Sale of Nuclear Assets:
    15-year
  GAS BUSINESS
    OUTLOOK
  Growth:
  
    fluctuations in weather conditions,
    use by independent power producers,
    availability of renewable energy sources,
    changes in gas commodity prices,
    Michigan economic conditions,
    the price of competing energy sources or fuels,
    gas consumption per customer, and
    improvements in gas appliance efficiency. CE-24




---



##### 



Consumers
    Energy Company
   GAS BUSINESS
    UNCERTAINTIES
    Gas Environmental Estimates:
  Gas Cost Recovery:
  Gas Depreciation:
    2007 Gas Rate Case:
  2008 Gas Rate Case:
  OTHER
    OUTLOOK
  Advanced Metering Infrastructure:
  Software Implementation:
  Michigan Public Service Commission:
 CE-25




---



##### 



Consumers
    Energy Company
  Litigation and Regulatory Investigation:
  Michigan Tax Legislation: 15-year
 Implementation
    of New Accounting Standards  SFAS No. 158, Employers Accounting for
    Defined Benefit Pension and Other Postretirement
    Plans  an amendment of FASB Statements No. 87,
    88, 106, and 132(R):
  FIN 48, Accounting for Uncertainty in Income
    Taxes:
     CE-26




---



##### 



Consumers
    Energy Company
   NEW
    ACCOUNTING STANDARDS NOT YET EFFECTIVE  SFAS No. 157, Fair Value
    Measurements:
    
    AROs,
    most of the nonfinancial assets and liabilities acquired in a
    business combination, and
    fair value measurements performed in conjunction with impairment
    analyses.    SFAS No. 159, The Fair Value Option for
    Financial Assets and Financial Liabilities, Including an
    amendment to FASB Statement No. 115:
  SFAS No. 160, Noncontrolling Interests in
    Consolidated Financial Statements, an Amendment of ARB
    No. 51:
  EITF Issue
    06-11,
    Accounting for Income Tax Benefits of Dividends on
    Share-Based Payment Awards: 06-11, 06-11
 CE-27




---



##### 



(This page
    intentionally left blank)
  CE-28




---



##### 



Consumers
    Energy Company
  CONSUMERS ENERGY
    COMPANY
  CONSOLIDATED
    STATEMENTS OF INCOME (LOSS)
  Years Ended December 312007


2006


2005In MillionsOperating Revenue

$
6,064


$
5,721


$
5,232Earnings from Equity Method Investees






1



1Operating ExpensesFuel for electric generation


385



672



605Fuel costs mark-to-market at the MCVPartnership






204



(200
)Purchased and interchange power


1,370



647



347Purchased power  related parties


79



74



68Cost of gas sold


1,918



1,770



1,844Other operating expenses


808



895



841Maintenance


183



284



218Depreciation and amortization


524



527



484General taxes


217



150



214Asset impairment charges






218



1,184Gain on asset sales, net


(2
)


(79
)


5,482



5,362



5,605Operating Income (Loss)


582



360



(372
)Other Income (Deductions)Interest and dividends


69



62



45Interest and dividends  related parties


1







Regulatory return on capital expenditures


31



26



4Other income


32



20



20Other expense


(14
)


(12
)


(15
)119



96



54Interest ChargesInterest on long-term debt


234



281



289Interest on long-term debt  related parties


2



5



16Other interest


34



13



5Capitalized interest


(6
)


(10
)


(38
)264



289



272Income (Loss) Before Income Taxes


437



167



(590
)Income Tax Expense (Benefit)


125



91



(47
)Income (Loss) Before Minority Obligations, Net


312



76



(543
)Minority Obligations, Net






(110
)


(447
)Net Income (Loss)


312



186



(96
)Preferred Stock Dividends


2



2



2Net Income (Loss) Available to Common Stockholder

$
310


$
184


$
(98
)    CE-29




---



##### 



Consumers
    Energy Company
  CONSUMERS ENERGY
    COMPANY
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended December 312007


2006


2005In MillionsCash Flows from Operating ActivitiesNet income (loss)

$
312


$
186


$
(96
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activitiesDepreciation and amortization (includes nuclear decommissioning
    of $4, $6 and $6)


524



527



484Deferred income taxes and investment tax credit


55



(113
)


(225
)Regulatory return on capital expenditures


(31
)


(26
)


(4
)Minority obligations, net






(110
)


(447
)Fuel costs mark-to-market at the MCV Partnership






204



(200
)Asset impairment charges






218



1,184Postretirement benefits expense


124



122



107Capital lease and other amortization


44



37



34Bad debt expense


33



30



24Gain on sale of assets


(2
)


(79
)


Earnings from equity method investees






(1
)


(1
)Postretirement benefits contributions


(173
)


(68
)


(62
)Changes in assets and liabilities:Decrease (increase) in accounts receivable, notes receivable and
    accrued revenue


(442
)


24



(229
)Decrease (increase) in accrued power supply and gas revenue


99



(91
)


(65
)Increase in inventories


(5
)


(114
)


(235
)Increase (decrease) in accounts payable


(23
)


(32
)


154Increase (decrease) in accrued expenses


(15
)


35



(13
)Increase (decrease) in accrued taxes


80



(101
)


146Increase (decrease) in the MCV Partnership gas supplier funds on
    deposit






(147
)


173Increase in other current and non-current assets


(5
)


(51
)


(20
)Increase (decrease) in other current and non-current liabilities


(133
)


23



(70
)Net cash provided by operating activities


442



473



639Cash Flows from Investing ActivitiesCapital expenditures (excludes assets placed under capital lease)


(1,258
)


(646
)


(572
)Cost to retire property


(28
)


(78
)


(27
)Restricted cash and restricted short-term investments


32



126



(162
)Investments in nuclear decommissioning trust funds


(1
)


(21
)


(6
)Proceeds from nuclear decommissioning trust funds


333



22



39Purchases of available-for-sale SERP investments


(31
)


(2
)


(1
)Proceeds from available-for-sale SERP investments


29



3



2Proceeds from short-term investments










145Purchase of short-term investments










(141
)Maturity of the MCV Partnership restricted investment securities
    held-to-maturity






130



318Purchase of the MCV Partnership restricted investment securities
    held-to-maturity






(131
)


(270
)Cash proceeds from sale of assets


337



69



2Cash relinquished from sale of assets






(148
)


Other investing


2



4



12Net cash used in investing activities


(585
)


(672
)


(661
)   CE-30




---



##### 



Consumers
    Energy Company
  Years Ended December 312007


2006


2005In MillionsCash Flows from Financing ActivitiesProceeds from issuance of long term debt










910Retirement of long-term debt


(34
)


(217
)


(1,028
)Payment of common stock dividends


(251
)


(147
)


(277
)Payment of capital and finance lease obligations


(20
)


(26
)


(29
)Stockholders contribution, net


650



200



700Payment of preferred stock dividends


(1
)


(2
)


(2
)Increase (decrease) in notes payable


(42
)


15



27Debt issuance and financing costs


(1
)


(3
)


(34
)Net cash provided by (used in) financing activities


301



(180
)


267Net Increase (Decrease) in Cash and Cash Equivalents


158



(379
)


245Cash and Cash Equivalents, Beginning of Period


37



416



171Cash and Cash Equivalents, End of Period

$
195


$
37


$
416Other cash flow activities and non-cash investing and
    financing activities were:Cash transactionsInterest paid (net of amounts capitalized)

$
242


$
279


$
250Income taxes paid (net of refunds, $98, $39, and $8)






306



35Non-cash transactionsOther assets placed under capital lease

$
229


$
7


$
12    CE-31




---



##### 



Consumers
    Energy Company
  CONSUMERS ENERGY
    COMPANY
  CONSOLIDATED
    BALANCE SHEETS
  December 312007


2006In MillionsASSETSPlant and Property (at cost)Electric

$
8,555


$
8,504Gas


3,467



3,273Other


15



1512,037



11,792Less accumulated depreciation, depletion, and amortization


3,993



5,0188,044



6,774Construction
    work-in-progress


447



6398,491



7,413InvestmentsStock of affiliates


32



36Other






532



41Current AssetsCash and cash equivalents at cost, which approximates market


195



37Restricted cash at cost, which approximates market


25



57Accounts receivable and accrued revenue, less allowances of $16
    in 2007 and $14 in 2006


810



389Notes receivable


67



46Accrued power supply and gas revenue


45



156Accounts receivable  related parties


4



5Inventories at average costGas in underground storage


1,123



1,129Materials and supplies


79



81Generating plant fuel stock


100



105Deferred property taxes


158



150Regulatory assets  postretirement benefits


19



19Prepayments and other


28



502,653



2,224Non-current AssetsRegulatory assetsSecuritized costs


466



514Postretirement benefits


921



1,131Customer Choice Act


149



190Other


504



497Nuclear decommissioning trust funds






602Other


185



2332,225



3,167Total Assets

$
13,401


$
12,845    CE-32




---



##### 



Consumers
    Energy Company
  December 312007


2006In MillionsSTOCKHOLDERS INVESTMENT AND LIABILITIESCapitalizationCommon stockholders equityCommon stock, authorized 125.0 shares; outstanding
    84.1 shares for both periods

$
841


$
841Paid-in capital


2,482



1,832Accumulated other comprehensive income






15Retained earnings


324



2703,647



2,958Preferred stock


44



44Long-term debt


3,692



4,127Non-current portion of capital and finance lease obligations


225



427,608



7,171Current LiabilitiesCurrent portion of long-term debt, capital and finance lease
    obligations


470



44Notes payable  related parties






42Accounts payable


403



421Accrued rate refunds


19



37Accounts payable  related parties


13



18Accrued interest


65



62Accrued taxes


353



295Deferred income taxes


151



11Regulatory liabilities


164



Other


150



1841,788



1,114Non-current LiabilitiesDeferred income taxes


713



847Regulatory liabilitiesRegulatory liabilities for cost of removal


1,127



1,166Income taxes, net


533



539Other regulatory liabilities


313



249Postretirement benefits


813



993Asset retirement obligations


198



497Deferred investment tax credit


58



62Other


250



2074,005



4,560Commitments and Contingencies (Notes 3, 4, 5, 8, and 10)Total Stockholders Investment and Liabilities

$
13,401


$
12,845  CE-33




---



##### 



Consumers
    Energy Company
  CONSUMERS ENERGY
    COMPANY
  CONSOLIDATED
    STATEMENTS OF COMMON STOCKHOLDERS EQUITY
  Years Ended December 312007


2006


2005In MillionsCommon StockAt beginning and end of period(a)

$
841


$
841


$
841Other Paid-in CapitalAt beginning of period


1,832



1,632



932Stockholders contribution


650



200



700At end of period


2,482



1,832



1,632Accumulated Other Comprehensive IncomeRetirement benefits liabilityAt beginning of period


(8
)


(2
)


(1
)Retirement benefits liability adjustments(b)










(1
)Net loss arising during the period(b)


(7
)






Adjustment to initially apply FASB Statement No. 158, net
    of tax






(6
)


At end of period


(15
)


(8
)


(2
)InvestmentsAt beginning of period


23



18



12Unrealized gain (loss) on investments(b)


(1
)


5



6Reclassification adjustments included in net income (loss)(b)


(7
)






At end of period


15



23



18Derivative instrumentsAt beginning of period






56



20Unrealized gain (loss) on derivative instruments(b)






(21
)


53Reclassification adjustments included in net income (loss)(b)






(35
)


(17
)At end of period










56Total Accumulated Other Comprehensive Income






15



72Retained EarningsAt beginning of period


270



233



608Adjustment to initially apply FIN 48


(5
)






Net income (loss)(b)


312



186



(96
)Cash dividends declared  Common Stock


(251
)


(147
)


(277
)Cash dividends declared  Preferred Stock


(2
)


(2
)


(2
)At end of period


324



270



233Total Common Stockholders Equity

$
3,647


$
2,958


$
2,778    CE-34




---



##### 



Consumers
    Energy Company
  Years Ended December 312007


2006


2005In Millions(a) Number of shares of common stock outstanding was
    84,108,789 for all periods presented.(b) Disclosure of Comprehensive Income (Loss):Net income (loss)

$
312


$
186


$
(96
)Retirement benefits liabilityRetirement benefits liability adjustment, net of tax benefit of
    $










(1
)Net loss arising during the period, net of tax benefit of $(4)


(7
)






InvestmentsUnrealized gain (loss) on investments, net of tax (tax benefit)
    of $(1) in 2007, $2 in 2006, and $3 in 2005


(1
)


5



6Reclassification adjustments included in net income (loss), net
    of tax benefit of $(3)


(7
)






Derivative instrumentsUnrealized gain (loss) on derivative instruments, net of tax
    (tax benefit) of $(11) in 2006, and $28 in 2005






(21
)


53Reclassification adjustments included in net income (loss), net
    of tax benefit of $(19) in 2006, and $(10) in 2005






(35
)


(17
)Total Comprehensive Income (Loss)

$
297


$
135


$
(55
)  CE-35




---



##### 



Consumers
    Energy Company
   (This page
    intentionally left blank)
  CE-36




---



##### 



Consumers
    Energy Company
  CONSUMERS ENERGY
    COMPANY
  NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
 1: CORPORATE
    STRUCTURE AND ACCOUNTING POLICIES



Corporate Structure: Consumers, a subsidiary of CMS
    Energy, a holding company, is a combination electric and gas
    utility company serving Michigans Lower Peninsula. Our
    customer base includes a mix of residential, commercial, and
    diversified industrial customers. We manage our business by the
    nature of services each provides and operate principally in two
    business segments: electric utility and gas utility.



Principles of Consolidation: The consolidated
    financial statements include Consumers, and all other entities
    in which we have a controlling financial interest or are the
    primary beneficiary, in accordance with FIN 46(R). We use
    the equity method of accounting for investments in companies and
    partnerships that are not consolidated, where we have
    significant influence over operations and financial policies,
    but are not the primary beneficiary. We eliminate intercompany
    transactions and balances.



Use of Estimates: We prepare our consolidated
    financial statements in conformity with U.S. GAAP. We are
    required to make estimates using assumptions that may affect the
    reported amounts and disclosures. Actual results could differ
    from those estimates.



We record estimated liabilities for contingencies in our
    consolidated financial statements when it is probable that a
    liability was incurred and when the amount of loss can be
    reasonably estimated. For additional details, see Note 3,
    Contingencies.



Revenue Recognition Policy: We recognize revenues
    from deliveries of electricity and natural gas, and from the
    storage of natural gas when services are provided. We record
    unbilled revenues for the estimated amount of energy delivered
    to customers but not yet billed. We record sales tax on a net
    basis and exclude it from revenues.



Accounting for Legal Fees: We expense legal fees as
    incurred; fees incurred but not yet billed are accrued based on
    estimates of work performed. This policy also applies to fees
    incurred on behalf of employees and officers related to
    indemnification agreements; such fees are billed directly to us.



Accounting for MISO Transactions: MISO requires that
    we submit hourly day-ahead and real-time bids and offers for
    energy at locations across the MISO region. We account for MISO
    transactions on a net hourly basis in each of the real-time and
    day-ahead markets, and net transactions across all MISO energy
    market locations. We record net purchases in a single hour in
    Purchased and interchange power and net sales in a
    single hour in Operating Revenue in the Consolidated
    Statements of Income (Loss). We record expense accruals for
    future net purchases adjustments based on historical experience,
    and reconcile accruals to actual expenses when we receive
    invoices.



Capitalized Interest: We capitalize interest on
    certain qualifying assets that are undergoing activities to
    prepare them for their intended use. Capitalization of interest
    is limited to the actual interest cost incurred. Our regulated
    businesses capitalize AFUDC on regulated construction projects
    and include these amounts in plant in service.



Cash Equivalents and Restricted Cash: Cash
    equivalents are all liquid investments with an original maturity
    of three months or less.



At December 31, 2007, our restricted cash on hand was
    $25 million. We classify restricted cash dedicated for
    repayment of Securitization bonds as a current asset, as the
    related payments occur within one year.



Collective Bargaining Agreements: At
    December 31, 2007, the Utility Workers of America Union
    represented approximately 46 percent of our employees. The
    Union represents Consumers operating, maintenance, and
    construction employees and our call center employees.



Determination of Pension MRV of Plan Assets: We
    determine the MRV for pension plan assets, as defined in
    SFAS No. 87, as the fair value of plan assets on the
    measurement date, adjusted by the gains or losses that will not

CE-37




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Financial and Derivative Instruments:
      Impairment of Investments and Long-Lived Assets:
  held-in-use
      Inventory:
    Maintenance and Depreciation:
   CE-38




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Years Ended December 31

2007


2006


2005Electric utility property


3.0%



3.1%



3.1%Gas utility property


3.6%



3.6%



3.6%Other property


8.7%



8.2%



7.6%   Other Income and Other Expense:
  Years Ended December 31

2007


2006


2005In MillionsOther incomeElectric restructuring return

$
2


$
4


$
6Return on stranded and security costs


6



5



6MCV Partnership emmission allowance sales






8



2Gain on SERP investment


10







Gain on investment


7







Gain on stock


4



1



1All other


3



2



5Total other income

$
32


$
20


$
20   Years Ended December 31

2007


2006


2005In MillionsOther expenseLoss on reacquired debt

$



$



$
(6
)Civic and political expenditures


(2
)


(2
)


(2
)Donations






(9
)


Abandoned Midland Project


(8
)






Loss on SERP investment










(1
)All other


(4
)


(1
)


(6
)Total other expense

$
(14
)

$
(12
)

$
(15
)   Property, Plant, and Equipment:
   CE-39




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Years Ended December 31

2007

2006

2005AFUDC capitalization rate


7.4
%


7.5
%


7.6
%   Reclassifications:
  Related Party Transactions:
  Description

Related Party

2007


2006


2005In MillionsType of Income:Income from our investments in related party trusts

Consumers affiliated Trust Preferred Securities Companies

$



$



$
1Dividend Income

CMS Energy


1







Type of Expense:Electric generating capacity and energy

Affiliates of Enterprises


(79
)


(74
)


(68
)Interest expense on long-term debt

Consumers affiliated Trust Preferred Securities Companies






(1
)


(15
)Interest expense on note payable

CMS Energy


(2
)


(4
)


(1
)Overhead expense(a)

CMS Energy


(1
)


(1
)


(1
)Gas transportation(b)

CMS Bay Area Pipeline, L.L.C.


(1
)


(4
)


(4
)    (a)
    
    We base our related party transactions on regulated prices,
    market prices, or competitive bidding. We pay overhead costs to
    CMS Energy based on an industry allocation methodology, such as
    the Massachusetts Formula.(b)
    
    CMS Bay Area Pipeline, L.L.C. was sold to Lucid Energy in March
    2007.    Trade Receivables:
  Unamortized Debt Premium, Discount, and Expense:
 CE-40




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Utility Regulation:
    End ofRecoveryDecember 31

Period

2007


2006In MillionsAssets Earning a Return:Customer Choice Act

2010

$
149


$
190Unamortized debt costs

2035


74



86Stranded Costs

See Note 3


68



65Electric restructuring implementation plan

2008


14



40Manufactured gas plant sites (Note 3)

2016


33



15Abandoned Midland project

n/a






9Other(a)

various


50



21Assets Not Earning a Return:SFAS No. 158 transition adjustment (Note 6)

various


851



1,038Securitized costs (Note 4)

2015


466



514Postretirement benefits (Note 6)

2011


89



112ARO (Note 7)

n/a


85



177Big Rock nuclear decommissioning and related costs (Note 3)

n/a


129



35Manufactured gas plant sites (Note 3)

n/a


17



41Palisades sales transaction costs (Note 2)

n/a


28



Other(a)

2011


6



8Total regulatory assets(b)



$
2,059


$
2,351Palisades refund  Current (Note 2)(c)



$
164


$
Cost of removal (Note 7)




1,127



1,166Income taxes, net (Note 8)




533



539ARO (Note 7)




141



180Palisades refund  Noncurrent (Note 2)(c)




140



Other(a)




32



69Total regulatory liabilities(b)



$
2,137


$
1,954    (a)
    
    At December 31, 2007 and 2006, other regulatory assets
    include a gas inventory regulatory asset and OPEB and pension
    expense incurred in excess of the MPSC-approved amount. We will
    recover these regulatory assets from our customers by 2011.
    Other regulatory liabilities include liabilities related to the
    sale of sulfur dioxide allowances and AFUDC collected in excess
    of the MPSC-approved amount. CE-41




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     (b)
    
    At December 31, 2007, we classified $19 million of
    regulatory assets as current regulatory assets and
    $2.040 billion of regulatory assets as non-current
    regulatory assets. At December 31, 2006, we classified
    $19 million of regulatory assets as current regulatory
    assets and $2.332 billion of regulatory assets as
    non-current regulatory assets. At December 31, 2007, we
    classified $164 million of regulatory liabilities as
    current regulatory liabilities and $1.973 billion of
    regulatory liabilities as non-current regulatory liabilities. At
    December 31, 2006, all of our regulatory liabilities
    represented non-current regulatory liabilities.(c)
    
    The MPSC order approving the Palisades and Big Rock ISFSI
    transaction requires that we credit $255 million of excess
    proceeds and decommissioning amounts to our retail customers
    beginning in June 2007 through December 2008. The current
    portion of regulatory liabilities for Palisades refunds
    represents the remaining portion of this obligation, plus
    interest. There are additional excess sales proceeds and
    decommissioning fund balances above the amount in the MPSC
    order. The non-current portion of regulatory liabilities for
    Palisades refunds represents this obligation, plus interest. For
    additional details on the sale of Palisades and the Big Rock
    ISFSI, see Note 2, Asset Sales and Impairment Charges.      Years Ended December 31

2007


2006In MillionsRegulatory Assets for PSCR and GCRUnderrecoveries of power supply costs

$
45


$
156Regulatory Liabilities for PSCR and GCROverrecoveries of gas costs

$
19


$
37   New Accounting Standards Not Yet
    Effective: SFAS No. 157, Fair Value
    Measurements:
    
    AROs,
    most of the nonfinancial assets and liabilities acquired in a
    business combination, and
    fair value measurements performed in conjunction with impairment
    analyses. CE-42




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       SFAS No. 159, The Fair Value Option for Financial
    Assets and Financial Liabilities, Including an amendment to FASB
    Statement No. 115:
  SFAS No. 160, Noncontrolling Interests in
    Consolidated Financial Statements, an Amendment of ARB
    No. 51:
  EITF Issue
    06-11,
    Accounting for Income Tax Benefits of Dividends on Share-Based
    Payment Awards: 06-11, 06-11
  2:
    ASSET
    SALES AND IMPAIRMENT CHARGES  Asset
    Sales
      Pretax


After-taxMonth sold

Business/Project

Gain


GainIn MillionsApril

Palisades(a)

$



$
Various

Other


2



1Total gain on asset sales

$
2


$
1    (a)
    
    Sale of Nuclear Assets: In April 2007, we sold
    Palisades to Entergy for $380 million, and received
    $363 million after various closing adjustments such as
    working capital and capital expenditure adjustments and nuclear
    fuel usage and inventory adjustments. We also paid Entergy
    $30 million to assume ownership and responsibility for the
    Big Rock ISFSI. Because of the sale of Palisades, we paid the
    NMC, the former operator of Palisades, $7 million in exit
    fees and forfeited our $5 million investment in the NMC.   CE-43




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            Pretax


After-taxMonth sold

Business/Project

Gain


GainIn MillionsOctober

Land in Ludington, Michigan(a)

$
2


$
2November

MCV GP II(b)


77



38Total gain on asset sales

$
79


$
40    (a)
    
    We sold 36 parcels of land near Ludington, Michigan. We held a
    majority share of the land, which we co-owned with DTE Energy.
    Our portion of the proceeds was $6 million.(b)
    
    In November 2006, we sold all of our interests in the
    Consumers subsidiaries that held the MCV Partnership and
    the MCV Facility to an affiliate of GSO Capital Partners and
    Rockland Capital Energy Investments.      Impairment
    Charges
   CE-44




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        3:
    CONTINGENCIES  DOJ Investigation:
  SEC Investigation and Settlement: cease-and-desist
  Securities Class Action Settlement:
   CE-45




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Katz Technology Litigation:
  Electric
    Contingencies
  Electric Environmental Matters:
  Cleanup and Solid Waste:
      Ludington PCB:
  Electric Utility Plant Air Permit Issues:
  Litigation:
 CE-46




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Electric
    Rate Matters
  Electric ROA:
  Power Supply Costs:
  Power
    Supply Cost Recovery Reconciliation
  Net Under-

PSCR CostPSCR Year

Date Filed

Order Date

recovery

of Power Sold

Description of Net Underrecovery2005 Reconciliation

March 2006

July 2007

$36 million

$1.081 billion

MPSC approved the recovery of our $36 million underrecovery,
    including interest, related to our commercial and industrial
    customers.2006 Reconciliation

March 2007

Pending

$105 million(a)

$1.490 billion

Underrecovery relates to our increased METC costs and coal
    supply costs, certain increased sales, and other cost increases
    beyond those included in the 2006 PSCR plan filings.    (a)
    
    $99 million as recommended by a February 2008 ALJ Proposal for
    Decision. In a separate matter, this ALJ also recommended that
    we refund $62 million in proceeds from the sale of excess
    sulfur dioxide allowances. In accordance with FERC regulations,
    we previously reserved these proceeds as a regulatory liability
    pending final direction on disposition of the proceeds from the
    MPSC.  2007 PSCR Plan:
 CE-47




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      2008 PSCR Plan
    Electric Rate Case:
  
    recovery of the purchase of the Zeeland power plant,
    approval to remove the costs associated with Palisades,
    approval of a plan for the distribution of additional excess
    proceeds from the sale of Palisades to customers, effectively
    offsetting the partial and immediate rate relief for up to nine
    months, and
    partial and immediate rate relief associated with 2007 capital
    investments, a $400 million equity infusion into Consumers,
    and increased distribution system operation and maintenance
    costs including employee pension and health care costs.      Other
    Electric Contingencies
  The MCV PPA: 35-year
  Regulatory-out Provision in the MCV PPA:
 CE-48




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
          Nuclear Matters: Big Rock Decommissioning:
  Nuclear Fuel Disposal Cost:
  DOE Litigation:
   CE-49




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Gas
    Contingencies
  Gas Environmental Matters: 10-year
    Gas Title Transfer Tracking Fees and
    Services:
  FERC Investigation:
  Gas
    Rate Matters
  Gas Cost Recovery:
    Gas
    Cost Recovery Reconciliation
  Net Over-

GCR CostGCR Year

Date Filed

Order Date

recovery

of Gas Sold

Description of Net Overrecovery2005-2006

June 2006

April 2007

$3 million

$1.8 billion

The net overrecovery includes $1 million interest income through
    March 2006, which resulted from a net underrecovery position
    during most of the GCR period.2006-2007

June 2007

Pending

$5 million

$1.7 billion

The total overrecovery amount reflects an overrecovery of $1
    million plus $4 million in accrued interest owed to customers.   GCR plan for year
    2005-2006: 2005-2006
 CE-50




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    2005-2006
  GCR plan for year
    2006-2007: 2006-2007
  GCR plan for year
    2007-2008: 2007-2008
    GCR plan for year
    2008-2009: 2008-2009
  
    a base GCR ceiling factor of $8.17 per mcf, plus
    a quarterly GCR ceiling price adjustment contingent upon future
    events.  2007 Gas Rate Case:
  2008 Gas Rate Case:
  Other
    Contingencies
  Guarantees and Indemnifications:
    Expiration

MaximumGuarantee Description

Issue Date

Date

ObligationIn MillionsSurety bonds and other indemnifications

Various

Various

$
1
(a)Guarantee

January 1987

March 2016


85
(b)    (a)
    
    In the normal course of business, we issue surety bonds and
    indemnities to third parties to facilitate commercial
    transactions. We would be required to pay a counterparty if it
    incurs losses due to a breach of contract terms or
    nonperformance under the contract.(b)
    
    At December 31, 2007, only our guarantee to provide power
    and steam to Dow contained provisions reimbursing us for
    payments made under the guarantee. The purchaser of our interest
    in the MCV Partnership and FMLP, an affiliate of GSO Capital
    Partners and Rockland Capital Energy Investments, CE-51




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    agreed to pay us $85 million, subject to certain
    reimbursement rights, if Dow terminates the agreement under
    which the MCV Partnership provides it steam and electric power.
    This agreement expires in March 2016, subject to certain terms
    and conditions. The purchaser secured its reimbursement
    obligation with an irrevocable letter of credit of up to
    $85 million. At December 31, 2007, the guarantee
    liability recorded for surety bonds and indemnities and for the
    guarantee to provide power and steam to Dow was immaterial.    Other:
   CE-52




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    4:  FINANCINGS
    AND CAPITALIZATION    Interest Rate (%)


Maturity

2007


2006(In Millions)First mortgage bonds


4.250


2008

$
250


$
2504.800


2009


200



2004.400


2009


150



1504.000


2010


250



2505.000


2012


300



3005.375


2013


375



3756.000


2014


200



2005.000


2015


225



2255.500


2016


350



3505.150


2017


250



2505.650


2020


300



3005.650


2035


145



1475.800


2035


175



1753,170



3,172Senior notes


6.375


2008


159



1596.875


2018


180



180Securitization bonds


5.442
(a)

2008-2015


309



340Nuclear fuel disposal liability





(b)


159



152Tax-exempt pollution control revenue bonds


Various


2010-2035


161



161Total principal amount outstanding








4,138



4,164Current amounts








(440
)


(31
)Net unamortized discount








(6
)


(6
)Total long-term debt







$
3,692


$
4,127     (a)
    
    Represents the weighted average interest rate at
    December 31, 2007 (5.384 percent at December 31,
    2006).(b)
    
    The maturity date is uncertain.  First Mortgage Bonds:
  Securitization Bonds:
 CE-53




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Debt Maturities:
  Payments Due2008


2009


2010


2011


2012(In Millions)Long-term debt

$
440


$
384


$
343


$
37


$
339   Regulatory Authorization for Financings:
    
    up to $1.5 billion of new issuance for general corporate
    purposes and
    up to $1.0 billion for purposes of refinancing or refunding
    existing long-term debt.      Revolving Credit Facilities:
  OutstandingAmount of


Amount


Letters of


AmountCompany

Expiration Date


Facility


Borrowed


Credit


Available(In Millions)Consumers(a)


March 30, 2012


$
500


$



$
203


$
297Consumers(b)


November 28, 2008



200



NA



185



15     (a)
    
    In January 2008, $185 million of letters of credit were
    cancelled, resulting in the amount of credit available of
    $482 million under this facility.(b)
    
    Secured revolving letter of credit facility.  Dividend Restrictions:
  Sale of Accounts Receivable:
 CE-54




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Years Ended December 31

2007

2006(In Millions)Net cash flow as a result of accounts receivable financing

$
(325
)

$
Collections from customers

$
5,881


$
5,684   Preferred Stock:
  OptionalRedemption


Number of SharesDecember 31

Series


Price


2007


2006


2007


2006(In Millions)Preferred stockCumulative $100 par value, Authorized
    7,500,000 shares, with no mandatory redemption

$
4.16


$
103.25



68,451



68,451


$
7


$
7$
4.50


$
110.00



373,148



373,148



37



37Total Preferred stock

















$
44


$
44  5: FINANCIAL
    AND DERIVATIVE INSTRUMENTS  Financial Instruments:
    2007

2006Book

Fair

Book

FairDecember 31

Value

Value

Value

ValueIn MillionsLong-term debt(a)

$
4,132


$
4,099


$
4,158


$
4,111     (a)
    
    Includes current maturities of $440 million at
    December 31, 2007 and $31 million at December 31,
    2006. Settlement of long-term debt is generally not expected
    until maturity. CE-55




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       2007


2006Unrealized


Unrealized


Fair





Unrealized


Unrealized


FairDecember 31

Cost


Gains


Losses


Value


Cost


Gains


Losses


ValueIn MillionsCommon stock of CMS Energy(a)

$
8


$
24


$



$
32


$
10


$
26


$



$
36Nuclear decommissioning investments:Equity securities


















140



150



(4
)


286Debt securities


















307



4



(2
)


309SERP:Equity securities


35











35



17



9







26Debt securities


7











7



6











6     (a)
    
    At December 31, 2007, we held 1.8 million shares, and
    at December 31, 2006, we held 2.2 million shares of
    CMS Energy Common Stock.    (In Millions)Due after one year through five years

$
3Due after five years through ten years


4Total

$
7     Derivative Instruments:
      
    they do not have a notional amount (that is, a number of units
    specified in a derivative instrument, such as MWh of electricity
    or bcf of natural gas), CE-56




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     
    they qualify for the normal purchases and sales
    exception, or
    there is not an active market for the commodity.     6: RETIREMENT
    BENEFITS    
    a non-contributory, qualified defined benefit Pension Plan
    (closed to new non-union participants as of July 1, 2003
    and closed to new union participants as of September 1,
    2005),
    a qualified cash balance Pension Plan for certain employees
    hired between July 1, 2003 and August 31, 2005,
    a non-contributory, qualified DCCP for employees hired on or
    after September 1, 2005,
    benefits to certain management employees under a
    non-contributory, nonqualified defined benefit SERP (closed to
    new participants as of March 31, 2006),
    benefits to certain management employees under a
    non-contributory, nonqualified DC SERP hired on or after
    April 1, 2006,
    health care and life insurance benefits under OPEB,
    benefits to a selected group of management under a
    non-contributory, nonqualified EISP, and
    a contributory, qualified defined contribution 401(k) plan.  Pension Plan:
    Pension


OPEBPlan liability transferred to Entergy

$
38


$
20Trust assets transferred to Entergy


22



5Net adjustment

$
16


$
15    CE-57




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    SERP:
    401(k):
    EISP:
  OPEB:
    OneOne Percentage

PercentagePoint Increase

Point Decrease(In Millions)Effect on total service and interest cost component

$
20


$
(16
)Effect on postretirement benefit obligation

$
201


$
(169
)  CE-58




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      SFAS No. 158, Employers Accounting for
    Defined Benefit Pension and Other Postretirement
    Plans  an amendment of FASB Statements No. 87,
    88, 106, and 132(R):
  Assumptions:
  Weighted
    average for benefit obligations:
  Pension & SERP


OPEBYears Ended December 31

2007


2006


2005


2007


2006


2005Discount rate(a)


6.40%



5.65%



5.75%



6.50%



5.65%



5.75%Expected long-term rate of return on plan assets(b)


8.25%



8.25%



8.50%



7.75%



7.75%



8.00%Mortality table(c)


2000



2000



2000



2000



2000



2000Rate of compensation increase:Pension


4.00%



4.00%



4.00%SERP


5.50%



5.50%



5.50%   Weighted
    average for net periodic benefit cost:
  Pension & SERP


OPEBYears Ended December 31

2007


2006


2005


2007


2006


2005Discount rate(a)


5.65%



5.75%



5.75%



5.65%



5.75%



5.75%Expected long-term rate of return on plan assets(b)


8.25%



8.50%



8.75%



7.75%



8.00%



8.25%Mortality table(c)


2000



2000



2000



2000



2000



2000Rate of compensation increase:Pension


4.00%



4.00%



3.50%SERP


5.50%



5.50%



5.50%     (a)
    
    The discount rate represents the market rate for high-quality
    AA-rated corporate bonds with durations corresponding to the
    expected durations of the benefit obligations and is used to
    calculate the present value of the expected future cash flows
    for benefit obligations under our pension plans.(b)
    
    We determine our long-term rate of return by considering
    historical market returns, the current and expected future
    economic environment, the capital market principles of risk and
    return, and the expert opinions of individuals and firms with
    financial market knowledge. We consider the asset allocation of
    the portfolio in CE-59




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    forecasting the future expected total return of the portfolio.
    The goal is to determine a long-term rate of return that can be
    incorporated into the planning of future cash flow requirements
    in conjunction with the change in the liability. Annually, we
    review for reasonableness and appropriateness of the forecasted
    returns for various classes of assets used to construct an
    expected return model.(c)
    
    We utilize the Combined Healthy RP-2000 Table from the 2000
    Group Annuity Mortality Tables.  Costs:
  Pension & SERPYears Ended December 31

2007


2006


2005(In Millions)Net periodic pension costService cost

$
47


$
47


$
41Interest expense


84



81



76Expected return on plan assets


(75
)


(80
)


(89
)Amortization of:Net loss


44



41



33Prior service cost


7



7



5Net periodic pension cost


107



96



66Regulatory adjustment(a)


(22
)


(11
)


Net periodic pension cost after regulatory adjustment

$
85


$
85


$
66   OPEBYears Ended December 31

2007


2006


2005(In Millions)Net periodic OPEB costService cost

$
24


$
22


$
21Interest expense


65



60



58Expected return on plan assets


(57
)


(53
)


(49
)Amortization of:Net loss


23



20



20Prior service credit


(10
)


(10
)


(9
)Net periodic OPEB cost


45



39



41Regulatory adjustment(a)


(6
)


(2
)


Net periodic OPEB cost after regulatory adjustment

$
39


$
37


$
41     (a)
    
    Regulatory adjustments are the differences between amounts
    included in rates and the periodic benefit cost calculated
    pursuant to SFAS No. 87 and SFAS No. 106.
    These adjustments are deferred as a regulatory asset and will be
    included in future rate cases. The pension regulatory asset had
    a balance of $33 million at December 31, 2007 and
    $11 million at December 31, 2006. The OPEB regulatory
    asset had a balance of $8 million at December 31, 2007
    and $2 million at December 31, 2006.   CE-60




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        Reconciliations:
  Pension Plan


SERP


OPEBYears Ended December 31

2007


2006


2007


2006


2007


2006(In Millions)Benefit obligation at beginning of period

$
1,576


$
1,510


$
47


$
46


$
1,179


$
1,065Service cost


49



49



1



1



24



22Interest cost


86



83



3



3



65



60Actuarial loss (gain)


30



51



12



(1
)


(115
)


79Palisades sale


(38
)














(20
)


Benefits paid


(138
)


(117
)


(2
)


(2
)


(51
)


(47
)Benefit obligation at end of period(a)


1,565



1,576



61



47



1,082



1,179Plan assets at fair value at beginning of period


1,040



1,018











734



655Actual return on plan assets


89



126











51



67Company contribution


109



13



2



2



51



57Palisades sale


(22
)














(5
)


Actual benefits paid(b)


(138
)


(117
)


(2
)


(2
)


(46
)


(45
)Plan assets at fair value at end of period


1,078



1,040











785



734Funded status at end of measurement period


(487
)


(536
)


(61
)


(47
)


(297
)


(445
)Additional VEBA Contributions or Non-Trust Benefit Payments


















12



14Funded status at December 31(c)(d)

$
(487
)

$
(536
)

$
(61
)

$
(47
)

$
(285
)

$
(431
)     (a)
    
    The Medicare Prescription Drug, Improvement and Modernization
    Act of 2003 establishes a prescription drug benefit under
    Medicare (Medicare Part D), and a federal subsidy, which is
    tax-exempt, to sponsors of retiree health care benefit plans
    that provide a benefit that is actuarially equivalent to
    Medicare Part D. The Medicare Part D annualized
    reduction in net OPEB cost was $27 million for 2007
    and 2006. The reduction includes $7 million for the years
    ended December 31, 2007 and December 31, 2006 in
    capitalized OPEB costs.(b)
    
    We received $4 million in 2007 and $3 million in 2006
    for Medicare Part D Subsidy payments.(c)
    
    Liabilities for retirement benefits are $805 million
    non-current and $2 million current for year ended
    December 31, 2007 and $983 million non-current and
    $2 million current for year ended December 31, 2006.(d)
    
    Of the $487 million funded status of Pension Plan at
    December 31, 2007, $461 million is attributable to
    Consumers; and of the $536 million funded status of the
    Pension Plan at December 31, 2006, $507 million is
    attributable to Consumers, based on allocation of expenses. CE-61




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       Years Ended December 31

2007


2006(In Millions)Pension ABO

$
1,231


$
1,240Fair value of Pension Plan assets


1,078



1,040Pension ABO in excess of Pension Plan assets

$
153


$
200   SFAS No. 158 Recognized:
  Pension & SERP


OPEBYears Ended December 31

2007


2006


2007


2006(In Millions)Regulatory assetsNet loss

$
636


$
676


$
265


$
416Prior service cost (credit)


39



45



(89
)


(99
)AOCINet loss (gain)


18



7







Prior service cost (credit)


1



1







Total amounts recognized in regulatory assets and AOCI

$
694


$
729


$
176


$
317   Plan Assets:
  Pension


OPEBNovember 30

2007


2006


2007


2006Asset Category:Fixed Income


30
%


28
%


34
%


37
%Equity Securities


60
%


62
%


66
%


63
%Alternative Strategy


10
%


10
%






        CE-62




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      SFAS No. 132(R) Benefit Payments:
  Pension


SERP


OPEB(a)(In Millions)2008

$
64


$
2


$
532009


71



2



562010


78



2



582011


88



2



602012


101



2



612013-2017


664



10



339     (a)
    
    OPEB benefit payments are net of employee contributions and
    expected Medicare Part D prescription drug subsidy
    payments. The subsidies to be received are estimated to be
    $5 million for 2008, $6 million for 2009 and 2010,
    $7 million for 2011, $8 million for 2012 and
    $47 million combined for 2013 through 2017. 7: ASSET
    RETIREMENT OBLIGATIONS  SFAS No. 143, Accounting for Asset Retirement
    Obligations:
    FASB Interpretation No. 47, Accounting for
    Conditional Asset Retirement Obligations:
 CE-63




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      In ServiceARO Description

Date


Long-Lived AssetsDecember 31, 2007JHCampbell intake/discharge water line


1980


Plant intake/discharge water lineClosure of coal ash disposal areas


Various


Generating plants coal ash areasClosure of wells at gas storage fields


Various


Gas storage fieldsIndoor gas services equipment relocations


Various


Gas meters located inside structuresAsbestos abatement


1973


Electric and gas utility plantGas distribution cut, purge & cap


Various


Gas distribution mains & services     ARO














AROLiability











Cash flow


LiabilityARO Description

12/31/05


Incurred


Settled(a)


Accretion


Revisions


12/31/06(In Millions)Palisades-decommission

$
375


$



$



$
26


$



$
401Big
    Rock-decommission


27







(28
)


3







2JHCampbell intake line






















Coal ash disposal areas


54







(2
)


5







57Wells at gas storage fields


1



















1Indoor gas services relocations


1



















1Asbestos abatement


36







(3
)


2







35Gas distribution cut, purge, cap






















Total

$
494


$



$
(33
)

$
36


$



$
497   ARO














AROLiability











Cash flow


LiabilityARO Description

12/31/06


Incurred


Settled(a)


Accretion


Revisions


12/31/07(In Millions)Palisades-decommission

$
401


$



$
(410
)

$
7


$
2


$
Big
    Rock-decommission


2







(3
)


1







JHCampbell intake line






















Coal ash disposal areas


57







(4
)


6







59Wells at gas storage fields


1



















1Indoor gas services relocations


1



















1Asbestos abatement


35







(1
)


2







36Gas distribution cut, purge, cap






101















101Total

$
497


$
101


$
(418
)

$
16


$
2


$
198     (a)
    
    Cash payments of $5 million in 2007 and $33 million in
    2006 are included in the Other current and non-current
    liabilities line in Net cash provided by operating activities in
    our Consolidated Statements of Cash Flows. In April 2007, we
    sold Palisades to Entergy and paid Entergy to assume ownership
    and responsibility for the Big CE-64




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Rock ISFSI. Our AROs related to Palisades and the Big Rock ISFSI
    ended with the sale, and we removed the related ARO liabilities
    from our Consolidated Balance Sheets. We also removed the Big
    Rock ARO related to the plant in the second quarter of 2007 due
    to the completion of decommissioning. 8: INCOME
    TAXES          Years Ended December 31

2007


2006


2005(In Millions)Current federal income taxes

$
114


$
212


$
176Current federal income tax benefit of operating loss
    carryforwards


(44
)


(8
)


(9
)Deferred federal income taxes


59



(109
)


(201
)Deferred ITC, net


(4
)


(4
)


(13
)Income tax expense (benefit)

$
125


$
91


$
(47
)    CE-65




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      December 31

2007


2006(In Millions)Current Assets and (Liabilities):Tax loss and credit carryforwards

$



$
32Employee benefits


5



6Other


48



Current Assets

$
53


$
38Gas inventory


(204
)


Other






(49
)Current Liabilities

$
(204
)

$
(49
)Net Current Asset/(Liability)

$
(151
)

$
(11
)Noncurrent Assets and (Liabilities):Tax loss and credit carryforwards

$
249


$
177SFAS No. 109 regulatory liability


207



189Nuclear decommissioning (including unrecovered costs)






57Employee benefits


39



30Noncurrent Assets

$
495


$
453Valuation Allowance






(15
)Net Noncurrent Assets

$
495


$
438Property

$
(919
)

$
(814
)Securitized costs


(180
)


(177
)Gas inventory






(168
)Nuclear decommisioning (including unrecovered costs)


(18
)


Other


(91
)


(126
)Noncurrent Liabilities

$
(1,208
)

$
(1,285
)Net Noncurrent Asset/(Liability)

$
(713
)

$
(847
)  CE-66




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Years Ended December 31

2007


2006


2005(In Millions)Net Income (Loss)

$
312


$
186


$
(96
)Income tax expense (benefit)


125



91



(47
)Income (loss) before income taxes


437



277



(143
)Statutory federal income tax rate


x 35
%


x 35
%


x 35
%Expected income tax expense (benefit)


153



97



(50
)Increase (decrease) in taxes from:Property differences


9



13



18IRS Settlement/Credit Restoration






(19
)


Medicare Part D exempt income


(9
)


(10
)


(6
)ITC amortization


(3
)


(4
)


(4
)Expiration of general business credits










6Valuation allowance


(23
)


15



(9
)Other, net


(2
)


(1
)


(2
)Recorded income tax expense (benefit)

$
125


$
91


$
(47
)Effective tax rate


28.6
%


32.9
%


32.9
%       Accounting for Uncertainty in
    Income Taxes
 CE-67




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      (In Millions)Balance at January 1, 2007

$
51Reductions for prior year tax positions


(11
)Additions for prior year tax positions


1Additions for current year tax positions


Statute lapses


Settlements


Balance at December 31, 2007

$
41       Michigan Business Tax Act: 15-year
 9: STOCK
    BASED COMPENSATION     CE-68




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            Weighted-AverageRestricted Stock

Number of Shares


Grant Date Fair ValueNonvested at December 31, 2006


1,422,000


$
12.26Granted(a)


606,083


$
14.12Vested(a)


(641,004
)

$
16.09Forfeited


(12,000
)

$
13.95Nonvested at December 31, 2007


1,375,079


$
13.54     (a)
    
    During 2007, we granted 369,150 TSR shares and 83,020 time-lapse
    shares of restricted stock. In addition, we granted
    153,913 shares that immediately vested as a result of
    achieving 150 percent of the market conditions on our 2004
    TSR restricted stock grant. The fair value at the date of grant
    in 2004 was $9.73. We excluded the impact of these shares from
    the weighted-average grant date fair value for the
    2007 shares granted.    2007


2006


2005Expected Volatility


19.11
%


20.51
%


48.70
%Expected Dividend Yield


1.20
%


0.00
%


0.00
%Risk-free rate


4.59
%


4.82
%


4.14
%    CE-69




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Weighted-Options


Weighted-


AverageOutstanding,


Average


Remaining


AggregateFully Vested,


Exercise


Contractual


IntrinsicStock Options

and Exercisable


Price


Term


Value(In Millions)Outstanding at December 31, 2006


1,601,784


$
18.16



5.0 years


$
(2
)Granted






Exercised


(631,565
)


7.54Cancelled or Expired


(283,993
)


32.90Outstanding at December 31, 2007


686,226


$
21.83



3.6 years


$
(3
)       Years Ended December 31

2007


2006


2005Weighted average grant date fair valueRestricted stock granted

$
14.12


$
13.82


$
15.60Stock options granted(a)










     (a)
    
    No stock options were granted in 2007, 2006, or 2005.   10: LEASES       CE-70




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      Years Ended December 31

2007


2006


2005(In Millions)Capital lease expense

$
34


$
15


$
14Operating lease expense


23



19



17     Capital


Finance


OperatingLeases


Lease(a)


Leases(In Millions)2008

$
21


$
13


$
252009


16



13



232010


15



13



212011


13



13



212012


14



13



212013 and thereafter


53



122



93Total minimum lease payments


132



187


$
204Less imputed interest


64



Present value of net minimum lease payments


68



187Less current portion


17



13Non-current portion

$
51


$
174     (a)
    
    In April 2007, we sold Palisades to Entergy and entered into a
    15-year
    power purchase agreement to buy all of the capacity and energy
    produced by Palisades, up to the annual average capacity of
    798 MW. We provided $30 million in security to Entergy
    for our power purchase agreement obligation in the form of a
    letter of credit. We estimate that capacity and energy payments
    under the Palisades power purchase agreement will average
    $300 million annually. Our total purchases of capacity and
    energy under the Palisades power purchase agreement were
    $180 million in 2007.     CE-71




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    11: PROPERTY,
    PLANT, AND EQUIPMENT    EstimatedDepreciableDecember 31

Life in Years


2007


2006(In Millions)Electric:Generation


13-85


$
3,328


$
3,573Distribution


12-75



4,496



4,425Other


7-40



438



421Capital and finance leases(a)






293



85Gas:Underground storage facilities(b)


30-65



267



263Transmission


15-75



570



465Distribution


40-75



2,286



2,216Other


7-50



320



300Capital leases(a)






24



29Other:Non-utility property


7-71



15



15Construction
    work-in-progress






447



639Less accumulated depreciation, depletion, and amortization(c)






3,993



5,018Net property, plant, and equipment(d)





$
8,491


$
7,413     (a)
    
    Capital and finance leases presented in this table are gross
    amounts. Accumulated amortization of capital and finance leases
    was $62 million at December 31, 2007 and
    $59 million at December 31, 2006. Additions were
    $229 million during 2007, which includes $197 million
    related to assets under the Palisades finance lease. Retirements
    and adjustments were $26 million during 2007. Additions
    were $7 million and Retirements and adjustments were
    $6 million during 2006.(b)
    
    Includes unrecoverable base natural gas in underground storage
    of $26 million at December 31, 2007 and
    December 31, 2006, which is not subject to depreciation.(c)
    
    At December 31, 2007, accumulated depreciation, depletion,
    and amortization included $3.992 billion from our utility
    plant and $1 million related to our non-utility plant
    assets. At December 31, 2006, accumulated depreciation,
    depletion, and amortization included $5.017 billion from
    our utility plant and $1 million related to our non-utility
    plant assets.(d)
    
    At December 31, 2007, utility plant additions were
    $1.303 billion and utility plant retirements, including
    other plant adjustments, were $1.094 billion. At
    December 31, 2006, utility plant additions were
    $470 million and utility plant retirements, including other
    plant adjustments, were $82 million. Included in net
    property, plant and equipment are intangible assets. CE-72




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      December 31


2007


2006Amortization





Accumulated





AccumulatedDescription

Life in years


Gross Cost


Amortization


Gross Cost


Amortization(In Millions)Software development


7-15


$
207


$
170


$
204


$
153Rights of way


50-75



116



32



114



31Leasehold improvements


various



19



16



19



15Franchises and consents


various



14



5



19



10Other intangibles


various



18



13



18



13Total





$
374


$
236


$
374


$
222     Asset Acquisition:
 12: JOINTLY
    OWNED REGULATED UTILITY FACILITIES    Accumulated


ConstructionOwnership


Net Investment(a)


Depreciation


Work in ProgressDecember 31

Share


2007


2006


2007


2006


2007


2006(%)








(In Millions)Campbell Unit 3


93.3


$
664


$
262


$
337


$
370


$
44


$
353Ludington


51.0



65



68



104



95



1



1Distribution


Various



89



98



44



47



5



4     (a)
    
    Net investment is the amount of utility plant in service less
    accumulated depreciation.   13: REPORTABLE
    SEGMENTS     CE-73




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
          Years Ended December 31

2007


2006


2005(In Millions)Operating RevenuesElectric

$
3,443


$
3,302


$
2,701Gas


2,621



2,374



2,483Other






45



48$
6,064


$
5,721


$
5,232Earnings from Equity Method InvesteesElectric

$



$
1


$
Other










1$



$
1


$
1Depreciation and AmortizationElectric

$
397


$
380


$
292Gas


127



122



117Other






25



75$
524


$
527


$
484Interest ChargesElectric

$
193


$
167


$
133Gas


70



73



68Other


1



49



71$
264


$
289


$
272Income Tax Expense (Benefit)Electric

$
100


$
95


$
85Gas


47



18



39Other


(22
)


(22
)


(171
)$
125


$
91


$
(47
)Net Income (Loss) Available to Common StockholderElectric

$
196


$
199


$
153Gas


87



37



48Other


27



(52
)


(299
)$
310


$
184


$
(98
)Investments in Equity Method InvesteesElectric

$



$
5


$
3Other










4$



$
5


$
7 CE-74




---



##### 



CONSUMERS ENERGY
    COMPANY
   NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Years Ended December 31

2007


2006


2005(In Millions)Total AssetsElectric(a)

$
8,492


$
8,516


$
7,755Gas(a)


4,102



3,950



3,609Other


807



379



1,814$
13,401


$
12,845


$
13,178Capital Expenditures(b)Electric

$
1,319


$
462


$
384Gas


168



172



168Other






19



32$
1,487


$
653


$
584     (a)
    
    Amounts include a portion of our other common assets
    attributable to both the electric and gas utility businesses.(b)
    
    Amounts include purchase of nuclear fuel and capital lease
    additions. Amounts also include a portion of our capital
    expenditures for plant and equipment attributable to both the
    electric and gas utility businesses. 14: QUARTERLY
    FINANCIAL AND COMMON STOCK INFORMATION (UNAUDITED)  2007Quarters Ended

March 31


June 30


Sept. 30


Dec. 31In MillionsOperating revenue

$
2,055


$
1,247


$
1,172


$
1,590Operating income


209



104



124



145Net income


113



44



60



95Preferred stock dividends


1











1Net income available to common stockholder


112



44



60



94   2006Quarters Ended

March 31


June 30


Sept. 30


Dec. 31(a)In MillionsOperating revenue

$
1,782


$
1,138


$
1,191


$
1,610Operating income (loss)


7



78



239



36Net income


10



36



99



41Preferred stock dividends






1







1Net income available to common stockholder


10



35



99



40     (a)
    
    The quarter ended December 31, 2006 includes a
    $41 million net loss on the sale of our investment in the
    MCV Partnership, including the associated asset impairment
    charge. For additional details, see Note 2, Asset Sales and
    Impairment Charges. CE-75




---



##### 



Report of
    Independent Registered Public Accounting Firm    Internal Control  Integrated
    Framework
        
    CE-76




---



##### 



Report of
    Independent Registered Public Accounting Firm
      
    CE-77




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                CE-78




---



##### 



ITEM 9. CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS
    ON ACCOUNTING AND FINANCIAL DISCLOSURE  CMS
    Energy
    Consumers
   ITEM 9A. CMS
    ENERGYS CONTROLS AND PROCEDURES  Conclusion Regarding the Effectiveness of Disclosure Controls
    and Procedures: Rules 13a-15(e) 15d-15(e)
  Managements Report on Internal Control Over Financial
    Reporting: Rule 13a-15(f).
  
    pertain to the maintenance of records that in reasonable detail,
    accurately and fairly reflect the transactions and dispositions
    of the assets of CMS Energy;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles in the
    United States of America, and that receipts and expenditures of
    CMS Energy are being made only in accordance with authorizations
    of management and directors of CMS Energy; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of CMS
    Energys assets that could have a material effect on its
    financial statements.      Changes in Internal Control over Financial Reporting:
 CO-1




---



##### 



ITEM 9A.
    CONSUMERS CONTROLS AND PROCEDURES
  Conclusion Regarding the Effectiveness of Disclosure Controls
    and Procedures: Rules 13a-15(e) 15d-15(e)
  Managements Report on Internal Control Over Financial
    Reporting: Rule 13a-15(f).
  
    pertain to the maintenance of records that in reasonable detail,
    accurately and fairly reflect the transactions and dispositions
    of the assets of Consumers;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles in the
    United States of America, and that receipts and expenditures of
    Consumers are being made only in accordance with authorizations
    of management and directors of Consumers; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of
    Consumers assets that could have a material effect on its
    financial statements.      Changes in Internal Control over Financial
    Reporting:
 ITEM 9B. OTHER
    INFORMATION  CMS
    Energy
    Consumers
   CO-2




---



##### 



PART III ITEM 10.
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  CMS
    Energy
    CODES OF
    ETHICS
    Consumers
    CODES OF
    ETHICS
   ITEM 11.
    EXECUTIVE COMPENSATION    OFFICER INCENTIVE
    COMPENSATION PLAN
     CO-3




---



##### 



Corporate Performance:
  Annual Award Formula:
  Form 8-K
  Payment of Annual Awards:
 ITEM 12.
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS  CMS
    Energy
    Consumers
   CO-4




---



##### 



ITEM 13.
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE  CMS
    Energy
    Consumers
   ITEM 14.
    PRINCIPAL ACCOUNTANT FEES AND SERVICES  CMS
    Energy
    Consumers
   PART IV ITEM 15.
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES  (a)(1)
    Financial Statements and Reports of Independent Public
    Accountants for CMS Energy and Consumers are included in each
    companys ITEM 8. FINANCIAL STATEMENTS AND
    SUPPLEMENTARY DATA and are incorporated by reference herein.(a)(2)
    Index to Financial Statement Schedules.  PageSchedule II

Valuation and Qualifying Accounts and ReservesCMS Energy Corporation

CO-11Consumers Energy Company

CO-11Report of Independent Registered Public Accounting FirmCMS Energy Corporation

CMS-101Consumers Energy Company

CE-75     (a)(3)
    Exhibits for CMS Energy and Consumers are listed after
    Item 15(b) below and are incorporated by reference herein.(b)
    Exhibits, including those incorporated by reference. CO-5




---



##### 



CMS ENERGYS
    AND CONSUMERS EXHIBITS
  Previously FiledWith File

As ExhibitExhibits

Number

Number



Description(3)(a)

1-9513

(99)(a)



Restated Articles of Incorporation of CMS Energy dated June 1,
    2004 (Form 8-K filed June 3, 2004)(3)(b)

1-9513

(3)(b)



CMS Energy Corporation Bylaws, amended and restated as of August
    10, 2007  (3rd qtr. 2007 Form 10-Q)(3)(c)

1-5611

3(c)



Restated Articles of Incorporation dated May 26, 2000, of
    Consumers (2000 Form 10-K)(3)(d)

1-5611

(3)(d)



Consumers Energy Company Bylaws, amended and restated as of
    August 10, 2007 (3rd qtr. 2007 Form 10-Q)(4)(a)

2-65973

(b)(1)-4



Indenture dated as of September 1, 1945, between Consumers and
    Chemical Bank (successor to Manufacturers Hanover Trust
    Company), as Trustee, including therein indentures supplemental
    thereto through the Forty-third Supplemental Indenture dated as
    of May 1, 1979 (Designated in Consumers Power Companys
    Registration No. 2-65973 as Exhibit (b)(1)(4))

Indentures Supplemental thereto:1-5611

(4)(a)



70th dated as of 2/01/98 (1997 Form 10-K)1-5611

(4)(a)



71st dated as of 3/06/98 (1997 Form 10-K)1-5611

(4)(b)



75th dated as of 10/1/99 (1999 Form 10-K)1-5611

(4)(d)



77th dated as of 10/1/99 (1999 Form 10-K)1-5611

(4)(d)



90th dated as of 4/30/03 (1st qtr. 2003 Form 10-Q)1-5611

(4)(a)



91st dated as of 5/23/03 (3rd qtr. 2003 Form 10-Q)1-5611

(4)(b)



92nd dated as of 8/26/03 (3rd qtr. 2003 Form 10-Q)1-5611

(4)(a)



96th dated as of 8/17/04 (Form 8-K filed August 20, 2004)333-120611

(4)(e)(xv)



97th dated as of 9/1/04 (Consumers Form S-3 dated November
    18, 2004)1-5611

4.4



98th dated as of 12/13/04 (Form 8-K filed December 13, 2004)1-5611

(4)(a)(i)



99th dated as of 1/20/05 (2004 Form 10-K)1-5611

4.2



100th dated as of 3/24/05 (Form 8-K filed March 30, 2005)1-5611

(4)(a)



101st dated as of 4/1/05 (1st qtr 2005 Form 10-Q)1-5611

4.2



102nd dated as of 4/13/05 (Form 8-K filed April 13, 2005)1-5611

4.2



104th dated as of 8/11/05 (Form 8-K filed August 11, 2005)

106th dated as of November 30, 2007(4)(b)







105th Supplemental Indenture (dated as of March 30, 2007)
    to the Indenture dated as of September 1, 1945 between Consumers
    and Chemical Bank (successor to Manufacturers Hanover Trust
    Company), as Trustee(4)(c)

1-5611

(4)(b)



Indenture dated as of January 1, 1996 between Consumers and The
    Bank of New York, as Trustee (1995 Form 10-K)(4)(d)

1-5611

(4)(c)



Indenture dated as of February 1, 1998 between Consumers and
    JPMorgan Chase Bank, N.A. (formerly The Chase Manhattan Bank),
    as Trustee (1997 Form 10-K)(4)(e)

33-47629

(4)(a)



Indenture dated as of September 15, 1992 between CMS Energy and
    NBD Bank, as Trustee  (Form S-3 filed May 1, 1992)

Indentures Supplemental thereto:333-58686

(4)(a)



11th dated as of 3/29/01 (Form S-8 filed April 11, 2001)1-9513

(4)(d)(i)



15th dated as of 9/29/04 (2004 Form 10-K)1-9513

(4)(d)(ii)



16th dated as of 12/16/04 (2004 Form 10-K)1-9513

4.2



17th dated as of 12/13/04 (Form 8-K filed December 13, 2004)1-9513

4.2



18th dated as of 1/19/05 (Form 8-K filed January 20, 2005)1-9513

4.2



19th dated as of 12/13/05 (Form 8-K filed December 15,
    2005) CO-6




---



##### 



Previously FiledWith File

As ExhibitExhibits

Number

Number



Description1-9513

4.2



20th dated as of July 3, 2007 (Form 8-K filed July 5, 2007)1-9513

4.3



21st dated as of July 3, 2007 (Form 8-K filed July 5, 2007)(4)(f)

1-9513

(4a)



Indenture dated as of June 1, 1997, between CMS Energy and The
    Bank of New York, as trustee  (Form 8-K filed July 1, 1997)

Indentures Supplemental thereto:1-9513

(4)(b)



1st dated as of 6/20/97 (Form 8-K filed July 1, 1997)(4)(g)

1-9513

(4)(i)



Certificate of Designation of 4.50% Cumulative Convertible
    Preferred Stock of CMS Energy dated as of December 2, 2003 (2003
    Form 10-K)(10)(a)

1-9513

10.2



$300 million Seventh Amended and Restated Credit Agreement dated
    as of April 2, 2007 among CMS Energy Corporation, the Banks, the
    Administrative Agent,  Collateral Agent, Syndication Agent and
    Documentation Agents all defined therein (Form 8-K filed April
    3, 2007)

Amendments thereto:Amendment No. 1 dated December 19, 20071-9513

10.1



Assumptions thereto:Assumption and Acceptance dated January 8, 2008 (Form 8-K filed
    January 11, 2008)(10)(b)







Fourth Amended and Restated Pledge and Security Agreement dated
    as of April 2, 2007 among CMS Energy, and Collateral Agent, as
    defined therein(10)(c)







Cash Collateral Agreement dated as of April 2, 2007, made by CMS
    Energy to the Administrative Agent for the lenders and
    Collateral Agent, as defined therein(10)(d)

1-5611

10.1



$500 million Fourth Amended and Restated Credit Agreement dated
    as of March 30, 2007 among Consumers Energy Company, the Banks,
    the Administrative Agent, the Collateral Agent, the Syndication
    Agent and the Documentation Agents all as defined therein (Form
    8-K filed April 3, 2007)(10)(e)







2004 Form of Executive Severance Agreement(10)(f)







2004 Form of Officer Severance Agreement(10)(g)







2004 Form of Change-in-Control Agreement(10)(h)







CMS Energys Performance Incentive Stock Plan effective
    June 1, 2004 and as further amended effective November 30, 2007(10)(i)







CMS Deferred Salary Savings Plan effective December 1, 1989 and
    as further amended effective December 1, 2007(10)(j)







Annual Officer Incentive Compensation Plan for CMS Energy
    Corporation and its Subsidiaries effective January 1, 2004,
    amended and restated effective as of January 1, 2007 and further
    amended November 30, 2007(10)(k)







Supplemental Executive Retirement Plan for Employees of CMS
    Energy/Consumers Energy Company effective January 1, 1982, as
    further amended December 1, 2007(10)(l)







Defined Contribution Supplemental Executive Retirement Plan
    effective April 1, 2006 and as further amended effective
    December 1, 2007(10)(m)

1-9513

(10)(v)



Amended and Restated Investor Partner Tax Indemnification
    Agreement dated as of June 1, 1990 among Investor Partners, CMS
    Midland as Indemnitor and CMS Energy as Guarantor (1990 Form
    10-K) CO-7




---



##### 



Previously FiledWith File

As ExhibitExhibits

Number

Number



Description(10)(n)

1-9513

(19)(d)*



Environmental Agreement dated as of June 1, 1990 made by CMS
    Energy to The Connecticut National Bank and Others (1990 Form
    10-K)(10)(o)

1-9513

(10)(z)*



Indemnity Agreement dated as of June 1, 1990 made by CMS Energy
    to Midland Cogeneration Venture Limited Partnership (1990 Form
    10-K)(10)(p)

1-9513

(10)(aa)*



Environmental Agreement dated as of June 1, 1990 made by CMS
    Energy to United States Trust Company of New York, Meridian
    Trust Company, each Subordinated Collateral Trust Trustee and
    Holders from time to time of Senior Bonds and Subordinated Bonds
    and Participants from time to time in Senior Bonds and
    Subordinated Bonds (1990 Form 10-K)(10)(q)

33-37977

10.4



Power Purchase Agreement dated as of July 17, 1986 between MCV
    Partnership and Consumers (MCV Partnership) (Designated in
    Midland Cogeneration Venture Limited Partnerships Form S-1
    filed November 23, 1999, File No. 33-37977 as Exhibit 10.4)Amendments thereto:33-37977

10.5



Amendment No. 1 dated September 10, 1987 (MCV Partnership)33-37977

10.6



Amendment No. 2 dated March 18, 1988 (MCV Partnership)33-37977

10.7



Amendment No. 3 dated August 28, 1989 (MCV Partnership)33-37977

10.8



Amendment No. 4A dated May 25, 1989 (MCV Partnership)(10)(r)

1-5611

(10)(y)



Unwind Agreement dated as of December 10, 1991 by and among CMS
    Energy, Midland Group, Ltd., Consumers, CMS Midland, Inc., MEC
    Development Corp. and CMS Midland Holdings Company (1991 Form
    10-K)(10)(s)

1-5611

(10)(z)



Stipulated AGE Release Amount Payment Agreement dated as of June
    1, 1990, among CMS Energy, Consumers and The Dow Chemical
    Company (1991 Form 10-K)(10)(t)

1-5611

(10)(aa)*



Parent Guaranty dated as of June 14, 1990 from CMS Energy to
    MCV, each of the Owner Trustees, the Indenture Trustees, the
    Owner Participants and the Initial Purchasers of Senior Bonds in
    the MCV Sale Leaseback transaction, and MEC Development (1991
    Form 10-K)(10)(u)

1-8157

10.41



Contract for Firm Transportation of Natural Gas between
    Consumers Power Company and Trunkline Gas Company, dated
    November 1, 1989, and Amendment, dated November 1, 1989 (1989
    Form 10-K of PanEnergy Corp.)(10)(v)

1-8157

10.41



Contract for Firm Transportation of Natural Gas between
    Consumers Power Company and Trunkline Gas Company, dated
    November 1, 1989 (1991 Form 10-K of PanEnergy Corp.)(10)(w)

1-2921

10.03



Contract for Firm Transportation of Natural Gas between
    Consumers Power Company and Trunkline Gas Company, dated
    September 1, 1993 (1993 Form 10-K)(10)(x)

1-5611

(10)(a)



Asset Sale Agreement dated as of July 11, 2006 by and among
    Consumers Energy Company as Seller and Entergy Nuclear
    Palisades, LLC as Buyer (2nd qtr 2006 Form 10-Q)(10)(y)

1-5611

(10)(b)



Palisades Nuclear Power Plant Power Purchase Agreement dated as
    of July 11, 2006 between Entergy Nuclear Palisades, LLC and
    Consumers Energy Company (2nd qtr 2006 Form 10-Q)(10)(z)

1-9513

99.2



Letter of Intent dated January 31, 2007 between CMS Enterprises
    Company and Lucid Energy LLC (Form 8-K filed February 1, 2007) CO-8




---



##### 



Previously FiledWith File

As ExhibitExhibits

Number

Number



Description(10)(aa)

1-9513

99.2



Agreement of Purchase and Sale, by and between CMS Enterprises
    Company and Abu Dhabi National Energy Company PJSC dated as of
    February 3, 2007 (Form 8-K filed February 6, 2007)(10)(bb)

1-9513

99.2



Memorandum of Understanding dated February 13, 2007 between CMS
    Energy Corporation and Petroleos de Venezuela, S.A. (Form 8-K
    filed February 14, 2007)(10)(cc)

1-9513

10.1



Common Agreement dated March 12, 2007 between CMS Enterprises
    Company and Lucid Energy, LLC (Form 8-K filed March 14, 2007)(10)(dd)

1-9513

10.2



Agreement of Purchase and Sale dated March 12, 2007 by and among
    CMS Enterprises Company, CMS Energy Investment, LLC, and Lucid
    Energy, LLC and Michigan Pipeline and Processing, LLC (Form 8-K
    filed March 14, 2007)(10)(ee)

1-9513

10.3



Agreement of Purchase and Sale Dated March 12, 2007 by and among
    CMS Enterprises Company, CMS Generation Holdings Company, CMS
    International Ventures, LLC, and Lucid Energy, LLC and New
    Argentine Generation Company, LLC (Form 8-K filed March 14, 2007)(10)(ff)

1-9513

10.1



Agreement of Purchase and Sale by and between CMS Energy
    Corporation and Petroleos de Venezuela, S.A. dated March 30,
    2007 (Form 8-K filed April 5, 2007)(10)(gg)

1-9513

10.1



Share Purchase Agreement dated as of April 12, 2007 by and among
    CMS Electric and Gas, L.L.C., CMS Energy Brasil S.A. and CPFL
    Energia S.A. together with CMS Energy Corporation (solely for
    the limited purposes of Section 8.9) (Form 8-K filed April 17,
    2007)(10)(hh)

1-5611

99.2



Purchase and Sale Agreement by and between Broadway Gen Funding,
    LLC as Seller and Consumers Energy Company  as Buyer (Form 8-K
    filed May 29, 2007)(10)(ii)

1-9513

99.2



Amended and Restated Securities Purchase Agreement by and among
    CMS International Ventures, L.L.C., CMS Capital L.L.C., CMS Gas
    Argentina Company and CMS Enterprises and AEI Chile Holdings LTD
    together with Ashmore Energy International (for purposes of the
    Parent Guarantee) dated as of June 1, 2007 (Form 8-K filed June
    4, 2007)(10)(jj)

1-9513

99.3



Stock Purchase Agreement by and among Hydra-Co Enterprises,
    Inc., HCO-Jamaica, Inc., and AEI Central America LTD together
    with Ashmore Energy International dated as of May 31, 2007 (Form
    8-K filed June 4, 2007)(10)(kk)

1-9513

99.1



Securities Purchase Agreement by and among CMS International
    Ventures, L.L.C., CMS Capital, L.L.C., CMS Gas Argentina Company
    and CMS Enterprises Company and Pacific Energy LLC together with
    Empresa Nacional De Electricdad S.A. (for purposes of the Parent
    Guarantee) dated as of July 11, 2007 (Form 8-K filed July 11,
    2007)(10)(ll)

1-9513

(10)(a)



Form of Indemnification Agreement between CMS Energy Corporation
    and its Directors, effective as of November 1, 2007 (3rd qtr.
    2007 Form 10-Q)(10)(mm)

1-5611

(10)(b)



Form of Indemnification Agreement between Consumers Energy
    Company and its Directors, effective as of November 1, 2007 (3rd
    qtr. 2007 Form 10-Q) CO-9




---



##### 



Previously FiledWith File

As ExhibitExhibits

Number

Number



Description(10)(nn)

1-9513

10.1



$200 million Letter of Credit Reimbursement Agreement dated as
    of November 30, 2007 between Consumers Energy Company and the
    Bank of Nova Scotia (Form 8-K filed December 6, 2007)(12)(a)







Statement regarding computation of CMS Energys Ratio of
    Earnings to Fixed Charges and Preferred Dividends(12)(b)







Statement regarding computation of Consumers Ratio of
    Earnings to Fixed Charges and Preferred Dividends and
    Distributions(16)(a)

1-9513

16.1



Letter from Ernst & Young to the Securities and Exchange
    Commission dated January 25, 2007 (Form 8-K filed January 25,
    2007)(16)(b)

1-9513

16.1



Letter from Ernst & Young to the Securities and Exchange
    Commission dated February 28, 2007 (Form 8-K filed February 28,
    2007)(21)







Subsidiaries of CMS Energy and Consumers(23)(a)







Consent of PricewaterhouseCoopers LLP for CMS Energy(23)(b)







Consent of Ernst & Young for CMS Energy(23)(c)







Consent of PricewaterhouseCoopers LLP for CMS Energy re: MCV(23)(d)







Consent of PricewaterhouseCoopers LLP for Consumers Energy(23)(e)







Consent of Ernst & Young for Consumers Energy(23)(f)







Consent of PricewaterhouseCoopers LLP for Consumers Energy re:
    MCV(24)(a)







Power of Attorney for CMS Energy(24)(b)







Power of Attorney for Consumers(31)(a)







CMS Energys certification of the CEO pursuant to Section
    302 of the Sarbanes-Oxley Act of 2002(31)(b)







CMS Energys certification of the CFO pursuant to Section
    302 of the Sarbanes-Oxley Act of 2002(31)(c)







Consumers certification of the CEO pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002(31)(d)







Consumers certification of the CFO pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002(32)(a)







CMS Energys certifications pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002(32)(b)







Consumers certifications pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002     *
    
    Obligations of only CMS Energy but not of Consumers.   CO-10




---



##### 



CMS ENERGY
    CORPORATION
  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 YEARS ENDED
    DECEMBER 31, 2007, 2006 AND 2005
  Charged/Balance at





Accrued





BalanceBeginning


Charged


to other





at EndDescription

of Period


to Expense


Accounts


Deductions


of Period(In Millions)Accumulated provision for uncollectible accounts:2007

$
25


$
37


$
7


$
34


$
212006

$
25


$
30


$



$
30


$
252005

$
32


$
23


$



$
30


$
25Deferred tax valuation allowance:2007

$
72


$



$
81


$
121


$
322006

$
10


$
31


$
42


$
11


$
722005

$
42


$
1


$



$
33


$
10Allowance for notes receivable, including related parties:2007

$
101


$



$
1


$
69


$
332006

$
49


$
55


$
1


$
4


$
1012005

$
40


$
9


$



$



$
49   CONSUMERS ENERGY
    COMPANY
  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 YEARS ENDED
    DECEMBER 31, 2007, 2006 AND 2005
  Charged/Balance at





Accrued





BalanceBeginning


Charged


to other





at EndDescription

of Period


to Expense


Accounts


Deductions


of Period(In Millions)Accumulated provision for uncollectible accounts:2007

$
14


$
33


$



$
31


$
162006

$
13


$
30


$



$
29


$
142005

$
10


$
24


$



$
21


$
13Deferred tax valuation allowance:2007

$
15


$



$
8


$
23


$
2006

$



$
16


$



$
1


$
152005

$
9


$
1


$



$
10


$
  CO-11




---



##### 



SIGNATURES
      By
    /s/  David
    W. Joos        Signature

Title(i)

Principal executive officer:/s/  David
    W. JoosDavid
    W. Joos

President and Chief Executive Officer(ii)

Principal financial officer:/s/  Thomas
    J. WebbThomas
    J. Webb

Executive Vice President and
    Chief Financial Officer(iii)

Controller or principal 
    accounting officer:/s/  Glenn
    P. BarbaGlenn
    P. Barba

Vice President, Controller and
    Chief Accounting Officer(iv)

A majority of the Directors including those  named above:*Merribel
    S. Ayres

Director*Jon
    E. Barfield

Director*Richard
    M. Gabrys

Director*David
    W. Joos

Director*Philip
    R. Lochner, Jr.

Director*Michael
    T. Monahan

Director*Joseph
    F. Paquette, Jr.

Director CO-12




---



##### 



Signature

Title*Percy
    A. Pierre

Director*Kenneth
    L. Way

Director*Kenneth
    Whipple

Director*John
    B. Yasinsky

Director*By

/s/  Thomas
    J. WebbThomas
    J. Webb,
    Attorney-in-Fact  CO-13




---



##### 



SIGNATURES
      By
    /s/  David
    W. Joos       Signature

Title(i)

Principal executive officer:/s/  David
    W. JoosDavid
    W. Joos

Chief Executive Officer(ii)

Principal financial officer:/s/  Thomas
    J. WebbThomas
    J. Webb

Executive Vice President and
    Chief Financial Officer(iii)

Controller or principal 
    accounting officer:/s/  Glenn
    P. BarbaGlenn
    P. Barba

Vice President, Controller and
    Chief Accounting Officer(iv)

A majority of the Directors including those
    named above:*Merribel
    S. Ayres

Director*Jon
    E. Barfield

Director*Richard
    M. Gabrys

Director*David
    W. Joos

Director*Philip
    R. Lochner, Jr.

Director*Michael
    T. Monahan

Director*Joseph
    F. Paquette, Jr.

Director CO-14




---



##### 



Signature

Title*Percy
    A. Pierre

Director*Kenneth
    L. Way

Director*Kenneth
    Whipple

Director*John
    B. Yasinsky

Director*By

/s/  Thomas
    J. WebbThomas
    J. Webb,
    Attorney-in-Fact  CO-15




---



##### 



CMS ENERGYS
    AND CONSUMERS EXHIBIT INDEX
  Exhibits



Description(4)(a)




106th Supplemental Indenture dated as of November 30,
    2007, supplement to Indenture dated as of September 1,
    1945, between Consumers and Chemical Bank(4)(b)




105th Supplemental Indenture (dated as of March 30,
    2007) to the Indenture dated as of September 1, 1945
    between Consumers and Chemical Bank(10)(a)




Amendment No. 1 dated December 19, 2007 to
    $300 million Seventh Amended and Restated Credit Agreement
    dated as of April 2, 2007 among CMS Energy Corporation, the
    Banks, the Administrative Agent, Collateral Agent, Syndication
    Agent and Documentation Agents(10)(b)




Fourth Amended and Restated Pledge and Security Agreement dated
    as of April 2, 2007 among CMS Energy, and Collateral Agent,
    as defined therein(10)(c)




Cash Collateral Agreement dated as of April 2, 2007, made
    by CMS Energy to the Administrative Agent for the lenders and
    Collateral Agent, as defined therein(10)(e)




2004 Form of Executive Severance Agreement(10)(f)




2004 Form of Officer Severance Agreement(10)(g)




2004 Form of
    Change-in-Control
    Agreement(10)(h)




CMS Energys Performance Incentive Stock Plan effective
    February 3, 1988, as amended June 1, 2004 and as
    further amended effective November 30, 2007(10)(i)




CMS Deferred Salary Savings Plan effective December 1, 1989
    and as further amended effective December 1, 2007(10)(j)




Annual Officer Incentive Compensation Plan for CMS Energy
    Corporation and its Subsidiaries effective January 1, 2004,
    amended and restated effective as of January 1, 2007 and
    further amended November 30, 2007(10)(k)




Supplemental Executive Retirement Plan for Employees of CMS
    Energy/Consumers Energy Company effective January 1, 1982,
    as further amended December 1, 2007(10)(l)




Defined Contribution Supplemental Executive Retirement Plan
    effective April 1, 2006 and as further amended effective
    December 1, 2007(12)(a)




Statement regarding computation of CMS Energys Ratio of
    Earnings to Fixed Charges and Preferred Dividends(12)(b)




Statement regarding computation of Consumers Ratio of
    Earnings to Fixed Charges and Preferred Dividends and
    Distributions(21)




Subsidiaries of CMS Energy and Consumers(23)(a)




Consent of PricewaterhouseCoopers LLP for CMS Energy(23)(b)




Consent of Ernst & Young for CMS Energy(23)(c)




Consent of PricewaterhouseCoopers LLP for CMS Energy re: MCV(23)(d)




Consent of PricewaterhouseCoopers LLP for Consumers Energy(23)(e)




Consent of Ernst & Young for Consumers Energy(23)(f)




Consent of PricewaterhouseCoopers LLP for Consumers Energy re:
    MCV(24)(a)




Power of Attorney for CMS Energy(24)(b)




Power of Attorney for Consumers(31)(a)




CMS Energys certification of the CEO pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(31)(b)




CMS Energys certification of the CFO pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(31)(c)




Consumers certification of the CEO pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(31)(d)




Consumers certification of the CFO pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(32)(a)




CMS Energys certifications pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002(32)(b)




Consumers certifications pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002