Summary of CMS ENERGY CORP

MANAGEMENT'S DISCUSSION AND ANALYSIS
This MD&A is a combined report of CMS Energy and Consumers. It has been prepared in accordance with the instructions to Form 10-Q and Item 303 of Regulation S-K. This MD&A should be read in conjunction with the MD&A contained in CMS Energy's and Consumers' Form 10-K for the year ended December 31, 2008.
FORWARD-LOOKING STATEMENTS AND INFORMATION This Form 10-Q and other written and oral statements that CMS Energy and Consumers make contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The use of such words as "may," "could," "anticipates," "believes," "estimates," "expects," "intends," "plans," and other similar words is intended to identify forward-looking statements that involve risk and uncertainty. This discussion of potential risks and uncertainties is designed to highlight important factors that may impact CMS Energy's and Consumers' business and financial outlook. CMS Energy and Consumers have no obligation to update or revise forward-looking statements regardless of whether new information, future events, or any other factors affect the information contained in the statements. These forward-looking statements are subject to various factors that could cause CMS Energy's and Consumers' actual results to differ materially from the results anticipated in these statements. These factors include CMS Energy's and Consumers' inability to predict or control:
• the price of CMS Energy Common Stock, capital and financial market conditions, and the effect of these market conditions on CMS Energy's and Consumers' postretirement benefit plans, interest rates, and access to the capital markets, including availability of financing (including Consumers' accounts receivable sales program and CMS Energy's and Consumers' revolving credit facilities) to CMS Energy, Consumers, or any of their affiliates, and the energy industry;

• the impact of the continued downturn in the economy and the sharp downturn and extreme volatility in the financial and credit markets on CMS Energy, Consumers, or any of their affiliates, including their:

• revenues;

• capital expenditure program and related earnings growth;

• ability to collect accounts receivable from customers;

• cost of capital and availability of capital; and

• Pension Plan and postretirement benefit plans assets and required contributions;

• changes in the economic and financial viability of CMS Energy's and Consumers' suppliers, customers, including those in the automotive sector, and other counterparties and the continued ability of these third parties to meet their obligations to CMS Energy and Consumers;

• the market perception of the energy industry or of CMS Energy, Consumers, or any of their affiliates;

• the credit ratings of CMS Energy or Consumers;

• factors affecting 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;

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• changes in applicable laws, rules, regulations, principles or practices, or in their interpretation, including those related to taxes, environmental, and accounting matters, that could have an impact on CMS Energy's and Consumers' business, including the impact of any future regulations or laws regarding:

• carbon dioxide and other greenhouse gas emissions, including potential future legislation to establish a cap and trade system;

• mercury emissions;

• limitations on the use or construction of coal-based electric power plants; and

• renewable portfolio standards and energy efficiency mandates;

• national, regional, and local economic, competitive, and regulatory policies, conditions, and developments;

• adverse regulatory or legal interpretations or decisions, including those related to environmental laws and regulations, and potential environmental remediation costs associated with these interpretations or decisions, including but not limited to those that may affect Bay Harbor and Consumers' RMRR classification under NSR regulations;

• potentially adverse regulatory treatment or failure to receive timely regulatory orders concerning a number of significant matters affecting Consumers that are presently or potentially before the MPSC, including:

• adequate and timely recovery of:

• Clean Air Act capital and operating costs and other environmental and safety-related expenditures;

• power supply and natural gas supply costs;

• operation and maintenance expenses;

• additional utility rate-based investments;

• increased MISO energy and transmission costs;

• costs associated with energy efficiency investments and state or federally mandated renewable resource standards; and

• Big Rock decommissioning funding shortfalls;

• pressure on regulators to lessen rate impacts upon customers, particularly in difficult economic times;

• actions of regulators to prevent or curtail shutoffs for non-paying customers;

• regulatory orders preventing or curtailing rights to self-implement rate requests;

• authorization of a new clean coal plant; and

• implementation of new energy legislation;

• adverse consequences resulting from any past or future assertion of indemnity or warranty claims associated with assets and businesses previously owned by CMS Energy, including claims resulting from attempts by foreign or domestic governments to assess taxes on past operations or transactions;

• the ability of Consumers to recover nuclear fuel storage costs incurred as a result of the DOE's failure to accept spent nuclear fuel on schedule, and the outcome of pending litigation with the DOE;

• the impact of expanded enforcement powers and investigation activities at the FERC;

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• federal regulation of electric sales and transmission of electricity, including periodic re-examination by federal regulators of CMS Energy's and Consumers' 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, and their impact on CMS Energy's and Consumers' cash flow and working capital;

• changes in construction material prices and the availability of qualified construction personnel to implement Consumers' construction program;

• potential disruption or interruption of facilities or operations due to accidents, war, or terrorism, and the ability to obtain or maintain insurance coverage for these events;

• 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, and stability of insurance providers;

• technological developments in energy production, delivery, usage, and storage;

• achievement of capital expenditure and operating expense goals;

• the impact of CMS Energy's and Consumers' new integrated business software system on their operations, including utility customer billing and collections, finance, purchasing, human resources and payroll processes, and utility asset construction and maintenance work management systems;

• the impact of credit market and economic conditions on EnerBank;

• the outcome, cost, and other effects of legal or administrative proceedings, settlements, investigations or claims;

• population growth or decline in the geographic areas where CMS Energy and Consumers do business;

• the effectiveness of CMS Energy's and Consumers' risk management policies and procedures;

• CMS Energy's and Consumers' ability to achieve generation planning goals and the occurrence and duration of planned or unplanned generation outages;

• adverse outcomes regarding tax positions;

• earnings volatility, resulting from the application of fair value accounting to certain energy commodity contracts, such as electricity sales agreements, interest rate, and foreign currency contracts;

• changes in financial or regulatory accounting principles or policies, including possible changes to rules involving fair value accounting;

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• a possible future requirement to comply with International Financial Reporting Standards, which differ from GAAP in various ways, including the present lack of special accounting treatment for regulated activities similar to that provided under SFAS No. 71; and

• other business or investment matters that may be disclosed from time to time in CMS Energy's and Consumers' SEC filings, or in other publicly issued documents.

For additional details regarding these and other uncertainties, see the "Outlook" section included in this MD&A, Note 3, Contingencies, and Part II, Item 1A. Risk Factors.

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EXECUTIVE OVERVIEW
CMS Energy is an energy company operating primarily in Michigan and is the parent holding company of several subsidiaries, including Consumers and Enterprises. Consumers is a combination electric and gas utility company serving Michigan's Lower Peninsula. Consumers' electric utility operations include the generation, purchase, distribution, and sale of electricity. Consumers' gas utility operations include the purchase, transportation, storage, distribution, and sale of natural gas. Consumers' customer base includes a mix of residential, commercial, and diversified industrial customers. Enterprises, through its equity investments and subsidiaries, is primarily engaged in independent power production.
CMS Energy and Consumers manage their businesses by the nature of services each provides. CMS Energy operates principally in three business segments: electric utility; gas utility; and enterprises. Consumers operates principally in two business segments: electric utility and gas utility.
CMS Energy and Consumers earn revenue and generate cash from operations by providing electric and natural gas utility services, electric power generation, gas distribution, transmission and storage, and other energy-related services. Their businesses are affected primarily by:
• weather, especially during the heating and cooling seasons;

• economic conditions;

• regulation and regulatory matters;

• energy commodity prices;

• interest rates; and

• CMS Energy's and Consumers' debt credit ratings.

During the past several years, CMS Energy's business strategy has emphasized improving its consolidated balance sheet and maintaining focus on its core strength, which is Consumers' utility operations and service. Consumers' forecast calls for investing in excess of $6 billion from 2009 through 2013, with a key aspect of its strategy being the balanced energy initiative. The balanced energy initiative is a comprehensive energy resource plan to meet Consumers' projected short-term and long-term electric power requirements with energy efficiency, demand management, expanded use of renewable energy, development of new power plants, and pursuit of additional power purchase agreements to complement existing generating sources. Energy legislation signed into law in Michigan in 2008 requires that ten percent of Consumers' electric sales volume come from renewable energy sources by 2015. In compliance with this legislation, Consumers filed a renewable energy plan with the MPSC in February 2009 outlining its plans to build or contract for additional renewable energy capacity of 200 MW by December 31, 2013, and an additional 300 MW of renewable energy capacity by December 31, 2015. At the same time, Consumers filed an energy optimization plan, also called for by the 2008 legislation, under which Consumers will promote energy efficiency and provide incentives to reduce customer usage. Consumers' filings include a request for recovery of the cost of the renewable energy and energy optimization measures. Consumers also expects to self-implement increased electric rates in May 2009 under the 2008 legislation.
Consumers has filed an air permit application with the MDEQ for its planned new 800 MW clean coal-based plant, which is now in a public comment period. Consumers expects the MDEQ to act on the request by the end of the year. Consumers' filings at the MPSC also include a request for an increase in rates to cover various costs, including capital additions under the balanced energy initiative.
There is uncertainty associated with federal legislative and regulatory proposals related to the regulation

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of carbon dioxide emissions, particularly associated with coal-based generation. Federal legislation is being considered to establish a cap and trade system, or alternatively, to tax carbon dioxide emissions. In addition, the EPA recently issued a proposed finding that greenhouse gases, including carbon dioxide, contribute to air pollution that may endanger the public health and welfare, thus setting the stage for regulation of carbon dioxide emissions under the Clean Air Act. CMS Energy and Consumers are monitoring these developments for potential effects on their plans and operations.
Consumers is developing an advanced metering infrastructure system that will provide enhanced controls and information about its customer energy usage and notification of service interruptions. Consumers expects to develop integration software and pilot this new technology over the next two to three years. In the future, CMS Energy will focus its strategy on:
• investing in Consumers' utility system;

• growing earnings while controlling operating and fuel costs and CMS Energy debt;

• managing cash flow; and

• maintaining principles of safe, efficient operations, customer value, fair and timely regulation, and consistent financial performance.

As CMS Energy and Consumers execute this strategy, they will need to overcome a Michigan economy that has been impacted adversely by the continued downturn and uncertainty in Michigan's automotive industry. The financial market crisis, the effects of which became evident in a global economic downturn during the fourth quarter of 2008, continues to result in a negative economic outlook. A range of possible outcomes exists due to the uncertain financial market environment and ongoing government policy responses. Consumers expects its annual 2009 sales to decline by three percent for the electric utility and five percent for the gas utility and it projects slower growth in the longer term. While CMS Energy and Consumers believe that their sources of liquidity will be sufficient to meet their requirements, they continue to monitor developments in the financial and credit markets and government policy responses to those developments for potential implications for CMS Energy's and Consumers' businesses and their future financial needs.

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