XML 64 R11.htm IDEA: XBRL DOCUMENT
v2.3.0.15

Fair Value Measurements | 9 Months Ended
--- | ---
Sep. 30, 2011
Fair Value Measurements | 2: FAIR VALUE MEASUREMENTS Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
| • |  | Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
| • |  | Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, interest rates and yield curves observable at commonly quoted intervals, credit risks, default rates, and inputs derived from or corroborated by observable market data.
| • |  | Level 3 inputs are unobservable inputs that reflect CMS Energy's or Consumers' own assumptions about how market participants would value their assets and liabilities.
To the extent possible, CMS Energy and Consumers use quoted market prices or other observable market pricing data in valuing assets and liabilities measured at fair value. If this information is unavailable, they use market-corroborated data or reasonable estimates about market participant assumptions. CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety. Assets and Liabilities Measured at Fair Value on a Recurring Basis Presented in the following table are CMS Energy's and Consumers' assets and liabilities, by level within the fair value hierarchy, reported at fair value on a recurring basis at September 30, 2011:
In Millions |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 512 |  |  | $ | 512 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 14 |  |  |  | 14 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual fund |  |  | 87 |  |  |  | 87 |  |  |  | — |  |  |  | — |
State and municipal bonds |  |  | 26 |  |  |  | — |  |  |  | 26 |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts1 |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 2 |
Total2 |  | $ | 646 |  |  | $ | 618 |  |  | $ | 26 |  |  | $ | 2 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts3 |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | 3 |
Total4 |  | $ | 7 |  |  | $ | 4 |  |  | $ | — |  |  | $ | 3 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 282 |  |  | $ | 282 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 13 |  |  |  | 13 |  |  |  | — |  |  |  | — |
CMS Energy common stock |  |  | 31 |  |  |  | 31 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 3 |  |  |  | 3 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual fund |  |  | 57 |  |  |  | 57 |  |  |  | — |  |  |  | — |
State and municipal bonds |  |  | 17 |  |  |  | — |  |  |  | 17 |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 2 |
Total5 |  | $ | 406 |  |  | $ | 387 |  |  | $ | 17 |  |  | $ | 2 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 3 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
Total |  | $ | 3 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
1 |  | This amount is gross and excludes the impact of offsetting derivative assets and liabilities under master netting arrangements, which was less than $1million at September 30, 2011.
2 |  | At September 30, 2011, CMS Energy's assets classified as Level 3 represented less than one percent of CMS Energy's total assets measured at fair value.
3 |  | This amount is gross and excludes the impact of offsetting derivative assets and liabilities under master netting arrangements and offsetting cash margin deposits paid by CMS ERM to other parties, which was less than $1million at September 30, 2011.
4 |  | At September 30, 2011, CMS Energy's liabilities classified as Level 3 represented 43 percent of CMS Energy's total liabilities measured at fair value. The Level 3 liabilities consisted primarily of an electricity sales agreement held by CMS ERM.
5 |  | At September 30, 2011, Consumers' assets classified as Level 3 represented less than one percent of Consumers' total assets measured at fair value.
Presented in the following table are CMS Energy's and Consumers' assets and liabilities, by level within the fair value hierarchy, reported at fair value on a recurring basis at December 31, 2010:
In Millions |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 183 |  |  | $ | 183 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 6 |  |  |  | 6 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 6 |  |  |  | 6 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual fund |  |  | 62 |  |  |  | 62 |  |  |  | — |  |  |  | — |
State and municipal bonds |  |  | 28 |  |  |  | — |  |  |  | 28 |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts1 |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Total2 |  | $ | 287 |  |  | $ | 258 |  |  | $ | 28 |  |  | $ | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 6 |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts3 |  |  | 4 |  |  |  | — |  |  |  | — |  |  |  | 4 |
Total4 |  | $ | 10 |  |  | $ | 6 |  |  | $ | — |  |  | $ | 4 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 19 |  |  | $ | 19 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 6 |  |  |  | 6 |  |  |  | — |  |  |  | — |
CMS Energy common stock |  |  | 34 |  |  |  | 34 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual fund |  |  | 39 |  |  |  | 39 |  |  |  | — |  |  |  | — |
State and municipal bonds |  |  | 17 |  |  |  | — |  |  |  | 17 |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Total5 |  | $ | 121 |  |  | $ | 103 |  |  | $ | 17 |  |  | $ | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Total |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
1 |  | This amount is gross and excludes the impact of offsetting derivative assets and liabilities under master netting arrangements, which was less than $1million at December 31, 2010.
2 |  | At December 31, 2010, CMS Energy's assets classified as Level 3 represented less than one percent of CMS Energy's total assets measured at fair value.
3 |  | This amount is gross and excludes the impact of offsetting derivative assets and liabilities under master netting arrangements and offsetting cash margin deposits paid by CMS ERM to other parties, which was less than $1million at December 31, 2010.
4 |  | At December 31, 2010, CMS Energy's liabilities classified as Level 3 represented 40 percent of CMS Energy's total liabilities measured at fair value. The Level 3 liabilities consisted primarily of an electricity sales agreement held by CMS ERM.
5 |  | At December 31, 2010, Consumers' assets classified as Level 3 represented one percent of Consumers' total assets measured at fair value.
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. The funds invest in U.S. Treasury notes, other government-backed securities, repurchase agreements collateralized by U.S. Treasury notes, and highly rated, short-term corporate debt securities. Nonqualified Deferred Compensation Plan Assets: CMS Energy's and Consumers' nonqualified deferred compensation plan assets are invested in various mutual funds. CMS Energy and Consumers value these assets using a market approach, using the daily quoted net asset values provided by the fund managers that are the basis for transactions to buy or sell shares in each fund. CMS Energy and Consumers report these assets in other non-current assets on their consolidated balance sheets. SERP Assets: CMS Energy and Consumers value their SERP assets using a market approach, incorporating prices and other relevant information from market transactions. The SERP cash equivalents consist of a money market fund with daily liquidity, which invests in state and municipal securities. The SERP invests in a short-term, fixed-income mutual fund that holds a variety of debt securities with average maturities of one to three years. The fund invests primarily in investment-grade debt securities but, in order to achieve its investment objective, it may invest a portion of its assets in high-yield securities, foreign debt, and derivative instruments. The fair value of the fund is determined using the daily published net asset value, which is the basis for transactions to buy or sell shares in the fund. The SERP state and municipal bonds are investment grade securities that are valued using a matrix pricing model that incorporates Level 2 market-based information. The fair value of the bonds is derived from various observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bond ratings, and general information on market movements normally considered by market participants when pricing such debt securities. CMS Energy and Consumers report their SERP assets in other non-current assets on their consolidated balance sheets. For additional details about SERP securities, see Note 7, Financial Instruments. Nonqualified Deferred Compensation Plan Liabilities: CMS Energy and Consumers value their non-qualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect what is owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report these liabilities in other non-current liabilities on their consolidated balance sheets. Derivative Instruments: CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount. They use various inputs to value the derivatives depending on the type of contract and the availability of market data. CMS Energy has exchange-traded derivative contracts that are valued based on Level 1 quoted prices in actively traded markets, as well as derivatives valued using Level 2 inputs, including commodity market prices, interest rates, credit ratings, default rates, and market-based seasonality factors. CMS Energy and Consumers have classified certain derivatives as Level 3 since the fair value measurements incorporate pricing assumptions that cannot be observed or confirmed through market transactions. The most significant derivatives classified as Level 3 are an electricity sales agreement held by CMS ERM and FTRs held by Consumers. At December 31, 2010 and in prior periods, quoted electricity prices were not available for the entire term of the electricity sales agreement held by CMS ERM, and a proprietary forward pricing model was used to determine fair value. At September 30, 2011, quoted prices at the nearest active market were available for the entire term of the agreement. The agreement, however, remains classified as Level 3 since the pricing differential between the nearest active market in Ohio and the delivery point in Michigan cannot be confirmed with observable market transactions. There is no quoted pricing information for FTRs held by Consumers. Consumers determines the fair value of FTRs based on Consumers' average historical settlements. For fair values other than Level 1 prices, CMS Energy and Consumers may incorporate adjustments for the risk of nonperformance as deemed appropriate. For derivative assets, a credit adjustment is applied against the asset based on the published default rate for the credit rating assigned to the counterparty based on an internal credit-scoring model. This model considers various inputs, including the counterparty's financial statements, credit reports, trade press, and other information available to market participants. If the internal rating is comparable to credit ratings published by independent rating agencies, the resulting credit adjustment is classified as Level 2. If the internal rating is outside of the range of ratings given by independent agencies and the credit adjustment is significant to the overall valuation, the derivative fair value is classified as Level 3. CMS Energy and Consumers adjust their derivative liabilities downward to reflect the risk of their own nonperformance, based on their published credit ratings. CMS Energy and Consumers monitor market conditions and may incorporate other data, such as credit default swap rates, in determining adjustments for credit risk as warranted. For additional details about derivative contracts, see Note 8, Derivative Instruments. Assets and Liabilities Measured at Fair Value on a Recurring Basis using Significant Level 3 Inputs Presented in the following tables are reconciliations of changes in the fair values of Level 3 assets and liabilities at CMS Energy and Consumers:
In Millions |
|  | Three Months Ended |  |  | Nine Months Ended |
September 30 |  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | — |  |  | $ | (5 | ) |  | $ | (3 | ) |  | $ | (8 | )
Total gains (losses) included in earnings1 |  |  | (1 | ) |  |  | 2 |  |  |  | (1 | ) |  |  | 4 |
Total gains (losses) offset through regulatory accounting |  |  | (1 | ) |  |  | 3 |  |  |  | 2 |  |  |  | 4 |
Settlements |  |  | 1 |  |  |  | (3 | ) |  |  | 1 |  |  |  | (3 | )
Balance at end of period |  | $ | (1 | ) |  | $ | (3 | ) |  | $ | (1 | ) |  | $ | (3 | )
Unrealized gains (losses) included in earnings relating to assets and liabilities still held at end of period1 |  | $ | (1 | ) |  | $ | 2 |  |  | $ | — |  |  | $ | 4 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 3 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |
Total gains (losses) offset through regulatory accounting |  |  | (1 | ) |  |  | 3 |  |  |  | 2 |  |  |  | 4 |
Settlements |  |  | — |  |  |  | (2 | ) |  |  | (1 | ) |  |  | (3 | )
Balance at end of period |  | $ | 2 |  |  | $ | 1 |  |  | $ | 2 |  |  | $ | 1 |
1 |  | CMS Energy records realized and unrealized gains and losses for Level 3 recurring fair values in earnings as a component of operating revenue or maintenance and other operating expenses on its consolidated statements of income.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis CMS Energy and Consumers had no nonrecurring fair value measurements during the nine months ended September 30, 2011. Presented in the following table are CMS Energy's assets, by level within the fair value hierarchy, reported at fair value on a nonrecurring basis during the nine months ended September 30, 2010:
In Millions |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Losses |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets held for sale |  | $ | — |  |  | $ | — |  |  | $ | 7 |  |  | $ | (4 | )
In June 2010, CMS Energy wrote down assets held for sale from their carrying amount of $11 million to their fair value of $7 million, resulting in a loss of $4 million, which was recorded in earnings as part of discontinued operations. The fair value was determined based on a discounted cash flow technique. CMS Energy had no other nonrecurring fair value measurements and Consumers had no nonrecurring fair value measurements during the nine months ended September 30, 2010.
Consumers Energy Company [Member] |
Fair Value Measurements | 2: FAIR VALUE MEASUREMENTS Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:
| • |  | Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
| • |  | Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, interest rates and yield curves observable at commonly quoted intervals, credit risks, default rates, and inputs derived from or corroborated by observable market data.
| • |  | Level 3 inputs are unobservable inputs that reflect CMS Energy's or Consumers' own assumptions about how market participants would value their assets and liabilities.
To the extent possible, CMS Energy and Consumers use quoted market prices or other observable market pricing data in valuing assets and liabilities measured at fair value. If this information is unavailable, they use market-corroborated data or reasonable estimates about market participant assumptions. CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety. Assets and Liabilities Measured at Fair Value on a Recurring Basis Presented in the following table are CMS Energy's and Consumers' assets and liabilities, by level within the fair value hierarchy, reported at fair value on a recurring basis at September 30, 2011:
In Millions |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 512 |  |  | $ | 512 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 14 |  |  |  | 14 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual fund |  |  | 87 |  |  |  | 87 |  |  |  | — |  |  |  | — |
State and municipal bonds |  |  | 26 |  |  |  | — |  |  |  | 26 |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts1 |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 2 |
Total2 |  | $ | 646 |  |  | $ | 618 |  |  | $ | 26 |  |  | $ | 2 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts3 |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | 3 |
Total4 |  | $ | 7 |  |  | $ | 4 |  |  | $ | — |  |  | $ | 3 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 282 |  |  | $ | 282 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 13 |  |  |  | 13 |  |  |  | — |  |  |  | — |
CMS Energy common stock |  |  | 31 |  |  |  | 31 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 3 |  |  |  | 3 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual fund |  |  | 57 |  |  |  | 57 |  |  |  | — |  |  |  | — |
State and municipal bonds |  |  | 17 |  |  |  | — |  |  |  | 17 |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 2 |
Total5 |  | $ | 406 |  |  | $ | 387 |  |  | $ | 17 |  |  | $ | 2 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 3 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
Total |  | $ | 3 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
1 |  | This amount is gross and excludes the impact of offsetting derivative assets and liabilities under master netting arrangements, which was less than $1million at September 30, 2011.
2 |  | At September 30, 2011, CMS Energy's assets classified as Level 3 represented less than one percent of CMS Energy's total assets measured at fair value.
3 |  | This amount is gross and excludes the impact of offsetting derivative assets and liabilities under master netting arrangements and offsetting cash margin deposits paid by CMS ERM to other parties, which was less than $1million at September 30, 2011.
4 |  | At September 30, 2011, CMS Energy's liabilities classified as Level 3 represented 43 percent of CMS Energy's total liabilities measured at fair value. The Level 3 liabilities consisted primarily of an electricity sales agreement held by CMS ERM.
5 |  | At September 30, 2011, Consumers' assets classified as Level 3 represented less than one percent of Consumers' total assets measured at fair value.
Presented in the following table are CMS Energy's and Consumers' assets and liabilities, by level within the fair value hierarchy, reported at fair value on a recurring basis at December 31, 2010:
In Millions |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 183 |  |  | $ | 183 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 6 |  |  |  | 6 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 6 |  |  |  | 6 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual fund |  |  | 62 |  |  |  | 62 |  |  |  | — |  |  |  | — |
State and municipal bonds |  |  | 28 |  |  |  | — |  |  |  | 28 |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts1 |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Total2 |  | $ | 287 |  |  | $ | 258 |  |  | $ | 28 |  |  | $ | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 6 |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts3 |  |  | 4 |  |  |  | — |  |  |  | — |  |  |  | 4 |
Total4 |  | $ | 10 |  |  | $ | 6 |  |  | $ | — |  |  | $ | 4 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 19 |  |  | $ | 19 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 6 |  |  |  | 6 |  |  |  | — |  |  |  | — |
CMS Energy common stock |  |  | 34 |  |  |  | 34 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual fund |  |  | 39 |  |  |  | 39 |  |  |  | — |  |  |  | — |
State and municipal bonds |  |  | 17 |  |  |  | — |  |  |  | 17 |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Total5 |  | $ | 121 |  |  | $ | 103 |  |  | $ | 17 |  |  | $ | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Total |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
1 |  | This amount is gross and excludes the impact of offsetting derivative assets and liabilities under master netting arrangements, which was less than $1million at December 31, 2010.
2 |  | At December 31, 2010, CMS Energy's assets classified as Level 3 represented less than one percent of CMS Energy's total assets measured at fair value.
3 |  | This amount is gross and excludes the impact of offsetting derivative assets and liabilities under master netting arrangements and offsetting cash margin deposits paid by CMS ERM to other parties, which was less than $1 million at December 31, 2010.
4 |  | At December 31, 2010, CMS Energy's liabilities classified as Level 3 represented 40 percent of CMS Energy's total liabilities measured at fair value. The Level 3 liabilities consisted primarily of an electricity sales agreement held by CMS ERM.
5 |  | At December 31, 2010, Consumers' assets classified as Level 3 represented one percent of Consumers' total assets measured at fair value.
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. The funds invest in U.S. Treasury notes, other government-backed securities, repurchase agreements collateralized by U.S. Treasury notes, and highly rated, short-term corporate debt securities. Nonqualified Deferred Compensation Plan Assets: CMS Energy's and Consumers' nonqualified deferred compensation plan assets are invested in various mutual funds. CMS Energy and Consumers value these assets using a market approach, using the daily quoted net asset values provided by the fund managers that are the basis for transactions to buy or sell shares in each fund. CMS Energy and Consumers report these assets in other non-current assets on their consolidated balance sheets. SERP Assets: CMS Energy and Consumers value their SERP assets using a market approach, incorporating prices and other relevant information from market transactions. The SERP cash equivalents consist of a money market fund with daily liquidity, which invests in state and municipal securities. The SERP invests in a short-term, fixed-income mutual fund that holds a variety of debt securities with average maturities of one to three years. The fund invests primarily in investment-grade debt securities but, in order to achieve its investment objective, it may invest a portion of its assets in high-yield securities, foreign debt, and derivative instruments. The fair value of the fund is determined using the daily published net asset value, which is the basis for transactions to buy or sell shares in the fund. The SERP state and municipal bonds are investment grade securities that are valued using a matrix pricing model that incorporates Level 2 market-based information. The fair value of the bonds is derived from various observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bond ratings, and general information on market movements normally considered by market participants when pricing such debt securities. CMS Energy and Consumers report their SERP assets in other non-current assets on their consolidated balance sheets. For additional details about SERP securities, see Note 7, Financial Instruments. Nonqualified Deferred Compensation Plan Liabilities: CMS Energy and Consumers value their non-qualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect what is owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report these liabilities in other non-current liabilities on their consolidated balance sheets. Derivative Instruments: CMS Energy and Consumers value their derivative instruments using either a market approach that incorporates information from market transactions, or an income approach that discounts future expected cash flows to a present value amount. They use various inputs to value the derivatives depending on the type of contract and the availability of market data. CMS Energy has exchange-traded derivative contracts that are valued based on Level 1 quoted prices in actively traded markets, as well as derivatives valued using Level 2 inputs, including commodity market prices, interest rates, credit ratings, default rates, and market-based seasonality factors. CMS Energy and Consumers have classified certain derivatives as Level 3 since the fair value measurements incorporate pricing assumptions that cannot be observed or confirmed through market transactions. The most significant derivatives classified as Level 3 are an electricity sales agreement held by CMS ERM and FTRs held by Consumers. At December 31, 2010 and in prior periods, quoted electricity prices were not available for the entire term of the electricity sales agreement held by CMS ERM, and a proprietary forward pricing model was used to determine fair value. At September 30, 2011, quoted prices at the nearest active market were available for the entire term of the agreement. The agreement, however, remains classified as Level 3 since the pricing differential between the nearest active market in Ohio and the delivery point in Michigan cannot be confirmed with observable market transactions. There is no quoted pricing information for FTRs held by Consumers. Consumers determines the fair value of FTRs based on Consumers' average historical settlements. For fair values other than Level 1 prices, CMS Energy and Consumers may incorporate adjustments for the risk of nonperformance as deemed appropriate. For derivative assets, a credit adjustment is applied against the asset based on the published default rate for the credit rating assigned to the counterparty based on an internal credit-scoring model. This model considers various inputs, including the counterparty's financial statements, credit reports, trade press, and other information available to market participants. If the internal rating is comparable to credit ratings published by independent rating agencies, the resulting credit adjustment is classified as Level 2. If the internal rating is outside of the range of ratings given by independent agencies and the credit adjustment is significant to the overall valuation, the derivative fair value is classified as Level 3. CMS Energy and Consumers adjust their derivative liabilities downward to reflect the risk of their own nonperformance, based on their published credit ratings. CMS Energy and Consumers monitor market conditions and may incorporate other data, such as credit default swap rates, in determining adjustments for credit risk as warranted. For additional details about derivative contracts, see Note 8, Derivative Instruments. Assets and Liabilities Measured at Fair Value on a Recurring Basis using Significant Level 3 Inputs Presented in the following tables are reconciliations of changes in the fair values of Level 3 assets and liabilities at CMS Energy and Consumers:
In Millions |
|  | Three Months Ended |  |  | Nine Months Ended |
September 30 |  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | — |  |  | $ | (5 | ) |  | $ | (3 | ) |  | $ | (8 | )
Total gains (losses) included in earnings1 |  |  | (1 | ) |  |  | 2 |  |  |  | (1 | ) |  |  | 4 |
Total gains (losses) offset through regulatory accounting |  |  | (1 | ) |  |  | 3 |  |  |  | 2 |  |  |  | 4 |
Settlements |  |  | 1 |  |  |  | (3 | ) |  |  | 1 |  |  |  | (3 | )
Balance at end of period |  | $ | (1 | ) |  | $ | (3 | ) |  | $ | (1 | ) |  | $ | (3 | )
Unrealized gains (losses) included in earnings relating to assets and liabilities still held at end of period1 |  | $ | (1 | ) |  | $ | 2 |  |  | $ | — |  |  | $ | 4 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 3 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |
Total gains (losses) offset through regulatory accounting |  |  | (1 | ) |  |  | 3 |  |  |  | 2 |  |  |  | 4 |
Settlements |  |  | — |  |  |  | (2 | ) |  |  | (1 | ) |  |  | (3 | )
Balance at end of period |  | $ | 2 |  |  | $ | 1 |  |  | $ | 2 |  |  | $ | 1 |
1 |  | CMS Energy records realized and unrealized gains and losses for Level 3 recurring fair values in earnings as a component of operating revenue or maintenance and other operating expenses on its consolidated statements of income.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis CMS Energy and Consumers had no nonrecurring fair value measurements during the nine months ended September 30, 2011. Presented in the following table are CMS Energy's assets, by level within the fair value hierarchy, reported at fair value on a nonrecurring basis during the nine months ended September 30, 2010:
In Millions |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Losses |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets held for sale |  | $ | — |  |  | $ | — |  |  | $ | 7 |  |  | $ | (4 | )
In June 2010, CMS Energy wrote down assets held for sale from their carrying amount of $11 million to their fair value of $7 million, resulting in a loss of $4 million, which was recorded in earnings as part of discontinued operations. The fair value was determined based on a discounted cash flow technique. CMS Energy had no other nonrecurring fair value measurements and Consumers had no nonrecurring fair value measurements during the nine months ended September 30, 2010.

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration