State utility regulators are taking aim at the tens of millions of dollars that Michigan energy companies have donated to not-for-profit organizations that influence state political campaigns.

Consumers Energy Co. has agreed to a ban on donating corporate cash to "issue advocacy" organizations — often called "dark money groups." Consumers has given more than $40 million to one such organization.

The agreement, buried in a Michigan Public Service Commission electric rate-setting settlement issued last week, prohibits Consumers from donating money to 501c(4) nonprofits and 527 political organizations that engage in issue advocacy campaign advertising that stops short of outright supporting or opposing candidates.

"Consumers Energy agrees that it will not contribute any of its corporate treasury monies to an Internal Revenue Code 501c(4) entity or an Internal Revenue Code 527 entity during the period of time in which the rates established in this settlement agreement are in effect," the MPSC decision said.

The prohibition is effective for the rest of 2019, expiring on Jan. 1, 2020. But the ban could remain in place through the November 2020 election because the state's utility regulators have 10 months to decide a future electricity rate-setting case.

Between 2014 and 2017, Consumers Energy poured $43.5 million into the coffers of Citizens for Energizing Michigan's Economy, a 501(c)(4) social welfare organization run by current and former company executives, according to the company's financial disclosures with the MPSC.

In 2016 alone, the company contributed $20 million to CEME, which played an active role in several state Legislature primaries last summer.

Sally Talberg, chairwoman of the Public Service Commission, said the three-person commission was concerned by the "amount and use of these funds" by Consumers Energy in political campaigns.

Consumers Energy has long said the money it contributes to CEME comes from shareholders and not ratepayers.

"The political contributions of Consumers Energy were not funded from customer rates, rather from our shareholders — people that own the company — and not customers' bills," Consumers spokeswoman Katie Carey said in a statement. "We at Consumers Energy stand for the people of Michigan and are engaged in the political process to support pragmatic policies that focus on safe, reliable, and affordable energy for our customers in Michigan."

But the MPSC decision involved ratepayer money, raising questions about why the prohibition would be included in a rate-setting case before the state commission that regulates Consumers Energy.

"I can't imagine why the PSC would be trying to regulate a corporation's charitable giving unless they believed they were using ratepayer money to fund these dark money front groups," said former state Rep. Gary Glenn, a Midland County Republican and fierce critic of Consumers Energy.

Glenn and his wife, state Rep. Annette Glenn, were top targets of CEME in last year's elections as the group deployed a barrage of advertising against the couple. Gary Glenn sought a Senate seat, while Annette Glenn ran for his old House seat. Only Annette Glenn prevailed.

Talberg said Consumers Energy, a subsidiary of Jackson-based CMS Energy Corp. (NYSE: CMS), was using funds the company "earned in the form of a profit from its business operations" and that the money did not come from ratepayers.

The PSC regulates how Consumers Energy and DTE Energy Co. spend ratepayer dollars because of the near-monopoly the two utility giants have over the state's electric and natural gas energy market.

"While the utility was not prohibited from using its profit in this manner, the commission shares the concerns of other stakeholders about the amount and use of these funds by the regulated utility," Talberg said in a statement. "The settlement agreement reached in Consumers' recent electric rate case addresses this issue on a going-forward basis by prohibiting Consumers from funding political activities of this nature."

It's unclear what "stakeholders" raised concerns about Consumers Energy's political funding practices. Negotiations over rate case settlements with the PSC are confidential, commission spokesman Nick Assendelft said.

DTE Energy also has donated to a similar 501(c)4 group engaged in issue advocacy in elections called the Alliance for Michigan Power. Both the Consumers- and DTE-affiliated groups list the same Okemos law firm as their addresses in state incorporation records.

So far, the PSC has not subjected DTE Energy to the same prohibition on funding issue advocacy in political campaigns with money from company bank accounts.

"DTE has not had any similar agreements or language in our past or current rate cases or other MPSC filings," DTE spokesman Peter Ternes said in an email.

DTE currently has a rate case before the commission, Ternes said.

CEME has operated as Consumers Energy's issue advocacy group for a half-decade, running television and radio ads about candidates and sending mail advertising to voters.

"Our primary focus is to educate legislators and the general public on issues facing Michigan that focus on energy and the economy," said Howard Edelson, president of CEME and a former Consumers Energy lobbyist.

To remain operating outside of the campaign finance law governing political action committees, issue advocacy advertising can tell voters about the candidate with either negative or positive information. But the ads cannot directly advocate for the election or defeat of candidates.

"We don't get involved in any express advocacy," said Edelson, a Democratic strategist from Ann Arbor.

But CEME's ads caught the ire of several legislators last year, particularly because the group tried to influence primary elections involving critics of Michigan's energy law that greatly limits competition.

Glenn and Barrett have been advocates of loosening DTE Energy and Consumers Energy's control over the electricity and natural gas market for businesses and residential customers and allowing more utility companies into the marketplace.

In mid-Michigan, the group spent heavily trying to defeat state Rep. Tom Barrett, R-Potterville, in both his Republican primary and general election for a state Senate seat.

Barrett won the primary by 41 percentage points and prevailed in the general election by 10 percentage points.

"They spent hundreds of thousands of dollars against me, and they couldn't beat me in the primary and general," Barrett said. "They couldn't even scratch."

Because CEME is not subject to the state's campaign finance laws and regulations, it doesn't have to disclose its spending or any other sources of funds. The lack of public disclosure is why CEME and other 501(c)4 groups get referred to as operating with "dark money" because the donations can't be easily traced to the original source — and the spending is limitless.

The Michigan Campaign Finance Network, a Lansing watchdog group, was able to trace $770,000 of the group's 2018 spending through TV and radio advertising that broadcasters have to disclose with the Federal Communications Commission.

Craig Mauger, executive director of the Michigan Campaign Finance Network, said that given that there's no public record of CEME's spending and finances, it's possible the PSC's ban might not have much immediate effect on the group's ability to spend, as it may have plenty left in the bank.

"This group could have money sitting there so they won't need additional money," Mauger said. "This doesn't necessarily mean the organization is done spending."

Edelson wouldn't comment on the current status of CEME's bank account or whether it has other donors to sustain its operations in the absence of Consumers Energy's donations.

"We don't disclose our contributors," he said.

But Edelson said the organization isn't going out of business.

"It's been around since 2013 with the purpose of educating legislators and the general public on energy policy and the economy," Edelson told Crain's. "We'll continue to do that as issues come up in front of the Legislature as we move forward."