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Financial Instruments | 9 Months Ended
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Sep. 30, 2011
Financial Instruments | 7: FINANCIAL INSTRUMENTS The carrying amounts of CMS Energy's and Consumers' cash, cash equivalents, current accounts and notes receivable, short-term investments, and current liabilities approximate their fair values because of their short-term nature. Presented in the following table are the cost or carrying amounts and fair values of CMS Energy's and Consumers' long-term financial instruments:
In Millions
|  | September 30, 2011 |  |  | December 31, 2010
|  | Cost or |  |  |  |  |  |  | Cost or |  |  |  |
|  | Carrying |  |  |  |  |  |  | Carrying |  |  |  |
|  | Amount |  |  | Fair Value |  |  | Amount |  |  | Fair Value |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities held to maturity |  | $ | 7 |  |  | $ | 8 |  |  | $ | 5 |  |  | $ | 6 |
Securities available for sale |  |  | 113 |  |  |  | 113 |  |  |  | 90 |  |  |  | 90 |
Notes receivable1 |  |  | 439 |  |  |  | 459 |  |  |  | 386 |  |  |  | 407 |
Long-term debt2 |  |  | 7,153 |  |  |  | 8,093 |  |  |  | 7,174 |  |  |  | 7,861 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale |  | $ | 81 |  |  | $ | 105 |  |  | $ | 64 |  |  | $ | 90 |
Long-term debt3 |  |  | 4,335 |  |  |  | 4,901 |  |  |  | 4,525 |  |  |  | 4,891 |
1 Includes current portion of notes receivable of $16 million at September 30, 2011 and $11 million at December 31, 2010. 2 Includes current portion of long-term debt of $1,116 million at September 30, 2011 and $726 million at December 31, 2010. 3 Includes current portion of long-term debt of $338 million at September 30, 2011 and $37 million at December 31, 2010. Notes receivable consist of EnerBank's fixed-rate installment loans. EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk. Fair values for impaired loans are estimated using discounted cash flows or underlying collateral values. CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available. In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt. Depending on the information available, other valuation techniques may be used that rely on internal assumptions and models. CMS Energy includes the value of the conversion features in estimating the fair value of its convertible debt, and incorporates, as appropriate, information on the market prices of CMS Energy common stock. The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt. At September 30, 2011 and December 31, 2010, CMS Energy's long-term debt included $103 million principal amount that was supported by third-party credit enhancements. This entire principal amount was at Consumers. Presented in the following table are CMS Energy's and Consumers' investment securities:
In Millions
|  | September 30, 2011 |  |  | December 31, 2010
|  |  |  |  |  | Unrealized |  |  | Unrealized |  |  |  |  |  |  |  |  |  |  | Unrealized |  |  | Unrealized |  |  |  |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |  |  | Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
CMS Energy, including consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mutual fund |  | $ | 88 |  |  | $ | — |  |  | $ | 1 |  |  | $ | 87 |  |  | $ | 62 |  |  | $ | — |  |  | $ | — |  |  | $ | 62 |
State and municipal bonds |  |  | 25 |  |  |  | 1 |  |  |  | — |  |  |  | 26 |  |  |  | 28 |  |  |  | — |  |  |  | — |  |  |  | 28 |
Held to maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt securities |  |  | 7 |  |  |  | 1 |  |  |  | — |  |  |  | 8 |  |  |  | 5 |  |  |  | 1 |  |  |  | — |  |  |  | 6 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mutual fund |  | $ | 57 |  |  | $ | — |  |  | $ | — |  |  | $ | 57 |  |  | $ | 39 |  |  | $ | — |  |  | $ | — |  |  | $ | 39 |
State and municipal bonds |  |  | 17 |  |  |  | — |  |  |  | — |  |  |  | 17 |  |  |  | 17 |  |  |  | — |  |  |  | — |  |  |  | 17 |
CMS Energy common stock |  |  | 7 |  |  |  | 24 |  |  |  | — |  |  |  | 31 |  |  |  | 8 |  |  |  | 26 |  |  |  | — |  |  |  | 34 |
The mutual fund classified as available for sale is a short-term, fixed-income fund. During the nine months ended September 30, 2011, CMS Energy contributed $27 million to the SERP, which included a contribution of $20 million by Consumers. The contributions were used to acquire additional shares in the mutual fund. State and municipal bonds classified as available for sale consist of investment grade state and municipal bonds. Debt securities classified as held to maturity consist primarily of mortgage-backed securities held by EnerBank, as well as state and municipal bonds held by EnerBank. Presented in the following table is a summary of the sales activity for CMS Energy's and Consumers' investment securities:
In Millions
|  | Three months ended |  | Nine months ended
September 30 |  | 2011 |  | 2010 |  | 2011 |  | 2010
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from sales of investment securities1 |  | $ | 1 |  |  | $ — |  | $ | 2 |  |  | $ | 1 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from sales of investment securities1 |  | $ | 1 |  |  | $ — |  | $ | 1 |  |  | $ | — |
1 All of the proceeds related to sales of investments that were held within the SERP and classified as available for sale. Realized losses on these sales were less than $1 million for both CMS Energy and Consumers during each period. Presented in the following table are the fair values of the SERP state and municipal bonds by contractual maturity at September 30, 2011:
In Millions
|  | CMS Energy, |  |  |  |
|  | including Consumers |  |  | Consumers |
Due one year or less |  | $ | 2 |  |  | $ | 1 |
Due after one year through five years |  |  | 9 |  |  |  | 6 |
Due after five years through ten years |  |  | 12 |  |  |  | 8 |
Due after ten years |  |  | 3 |  |  |  | 2 |
Total |  | $ | 26 |  |  | $ | 17 |
Consumers Energy Company [Member] |
Financial Instruments | 7: FINANCIAL INSTRUMENTS The carrying amounts of CMS Energy's and Consumers' cash, cash equivalents, current accounts and notes receivable, short-term investments, and current liabilities approximate their fair values because of their short-term nature. Presented in the following table are the cost or carrying amounts and fair values of CMS Energy's and Consumers' long-term financial instruments:
In Millions
|  | September 30, 2011 |  |  | December 31, 2010
|  | Cost or |  |  |  |  |  |  | Cost or |  |  |  |
|  | Carrying |  |  |  |  |  |  | Carrying |  |  |  |
|  | Amount |  |  | Fair Value |  |  | Amount |  |  | Fair Value |
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities held to maturity |  | $ | 7 |  |  | $ | 8 |  |  | $ | 5 |  |  | $ | 6 |
Securities available for sale |  |  | 113 |  |  |  | 113 |  |  |  | 90 |  |  |  | 90 |
Notes receivable1 |  |  | 439 |  |  |  | 459 |  |  |  | 386 |  |  |  | 407 |
Long-term debt2 |  |  | 7,153 |  |  |  | 8,093 |  |  |  | 7,174 |  |  |  | 7,861 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale |  | $ | 81 |  |  | $ | 105 |  |  | $ | 64 |  |  | $ | 90 |
Long-term debt3 |  |  | 4,335 |  |  |  | 4,901 |  |  |  | 4,525 |  |  |  | 4,891 |
1 Includes current portion of notes receivable of $16 million at September 30, 2011 and $11 million at December 31, 2010. 2 Includes current portion of long-term debt of $1,116 million at September 30, 2011 and $726 million at December 31, 2010. 3 Includes current portion of long-term debt of $338 million at September 30, 2011 and $37 million at December 31, 2010. Notes receivable consist of EnerBank's fixed-rate installment loans. EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk. Fair values for impaired loans are estimated using discounted cash flows or underlying collateral values. CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available. In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt. Depending on the information available, other valuation techniques may be used that rely on internal assumptions and models. CMS Energy includes the value of the conversion features in estimating the fair value of its convertible debt, and incorporates, as appropriate, information on the market prices of CMS Energy common stock. The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt. At September 30, 2011 and December 31, 2010, CMS Energy's long-term debt included $103 million principal amount that was supported by third-party credit enhancements. This entire principal amount was at Consumers. Presented in the following table are CMS Energy's and Consumers' investment securities:
In Millions
|  | September 30, 2011 |  |  | December 31, 2010
|  |  |  |  |  | Unrealized |  |  | Unrealized |  |  |  |  |  |  |  |  |  |  | Unrealized |  |  | Unrealized |  |  |  |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |  |  | Cost |  |  | Gains |  |  | Losses |  |  | Fair Value |
CMS Energy, including consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mutual fund |  | $ | 88 |  |  | $ | — |  |  | $ | 1 |  |  | $ | 87 |  |  | $ | 62 |  |  | $ | — |  |  | $ | — |  |  | $ | 62 |
State and municipal bonds |  |  | 25 |  |  |  | 1 |  |  |  | — |  |  |  | 26 |  |  |  | 28 |  |  |  | — |  |  |  | — |  |  |  | 28 |
Held to maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt securities |  |  | 7 |  |  |  | 1 |  |  |  | — |  |  |  | 8 |  |  |  | 5 |  |  |  | 1 |  |  |  | — |  |  |  | 6 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available for sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mutual fund |  | $ | 57 |  |  | $ | — |  |  | $ | — |  |  | $ | 57 |  |  | $ | 39 |  |  | $ | — |  |  | $ | — |  |  | $ | 39 |
State and municipal bonds |  |  | 17 |  |  |  | — |  |  |  | — |  |  |  | 17 |  |  |  | 17 |  |  |  | — |  |  |  | — |  |  |  | 17 |
CMS Energy common stock |  |  | 7 |  |  |  | 24 |  |  |  | — |  |  |  | 31 |  |  |  | 8 |  |  |  | 26 |  |  |  | — |  |  |  | 34 |
The mutual fund classified as available for sale is a short-term, fixed-income fund. During the nine months ended September 30, 2011, CMS Energy contributed $27 million to the SERP, which included a contribution of $20 million by Consumers. The contributions were used to acquire additional shares in the mutual fund. State and municipal bonds classified as available for sale consist of investment grade state and municipal bonds. Debt securities classified as held to maturity consist primarily of mortgage-backed securities held by EnerBank, as well as state and municipal bonds held by EnerBank. Presented in the following table is a summary of the sales activity for CMS Energy's and Consumers' investment securities:
In Millions
|  | Three months ended |  | Nine months ended
September 30 |  | 2011 |  | 2010 |  | 2011 |  | 2010
CMS Energy, including Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from sales of investment securities1 |  | $ | 1 |  |  | $ — |  | $ | 2 |  |  | $ | 1 |
Consumers |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from sales of investment securities1 |  | $ | 1 |  |  | $ — |  | $ | 1 |  |  | $ | — |
1 All of the proceeds related to sales of investments that were held within the SERP and classified as available for sale. Realized losses on these sales were less than $1 million for both CMS Energy and Consumers during each period. Presented in the following table are the fair values of the SERP state and municipal bonds by contractual maturity at September 30, 2011:
In Millions
|  | CMS Energy, |  |  |  |
|  | including Consumers |  |  | Consumers |
Due one year or less |  | $ | 2 |  |  | $ | 1 |
Due after one year through five years |  |  | 9 |  |  |  | 6 |
Due after five years through ten years |  |  | 12 |  |  |  | 8 |
Due after ten years |  |  | 3 |  |  |  | 2 |
Total |  | $ | 26 |  |  | $ | 17 |

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