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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2011
Fair Value Measurements | 4: 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 tables are CMS Energy's and Consumers' assets and liabilities, by level within the fair value hierarchy, reported at fair value on a recurring basis:
December 31, 2011 |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 109 |  |  | $ | 109 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 15 |  |  |  | 15 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual funds |  |  | 113 |  |  |  | 113 |  |  |  | — |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 3 |  |  |  | 1 |  |  |  | — |  |  |  | 2 |
Total |  | $ | 245 |  |  | $ | 243 |  |  | $ | — |  |  | $ | 2 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 7 |  |  |  | — |  |  |  | 3 |  |  |  | 4 |
Total |  | $ | 11 |  |  | $ | 4 |  |  | $ | 3 |  |  | $ | 4 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 56 |  |  | $ | 56 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 14 |  |  |  | 14 |  |  |  | — |  |  |  | — |
CMS Energy common stock |  |  | 35 |  |  |  | 35 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 3 |  |  |  | 3 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual funds |  |  | 74 |  |  |  | 74 |  |  |  | — |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 2 |
Total |  | $ | 185 |  |  | $ | 183 |  |  | $ | — |  |  | $ | 2 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 3 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
Total |  | $ | 3 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
December 31, 2010 |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
|  |  |  |  | In Millions |  |  |  |
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 contracts |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Total |  | $ | 287 |  |  | $ | 258 |  |  | $ | 28 |  |  | $ | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 6 |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 4 |  |  |  | — |  |  |  | — |  |  |  | 4 |
Total |  | $ | 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 |
Total |  | $ | 121 |  |  | $ | 103 |  |  | $ | 17 |  |  | $ | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Total |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. Nonqualified Deferred Compensation Plan Assets: The nonqualified deferred compensation plan assets consist of various mutual funds that are valued using a market approach. CMS Energy and Consumers value these assets using the daily quoted net asset values 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. The SERP invests in mutual funds that hold primarily fixed-income instruments of varying maturities. In order to meet their investment objectives, the funds hold investment-grade debt securities, and may invest a portion of their assets in high-yield securities, foreign debt, and derivative instruments. CMS Energy and Consumers value these funds using the daily quoted net asset values that are the basis for transactions to buy or sell shares in each fund. At December 31, 2010, the SERP held state and municipal bonds, which were valued using a matrix pricing model incorporating Level 2 market-based information. The fair value of the bonds was 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 9, 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. CMS Energy has exchange-traded derivative contracts that are valued based on Level 1 quoted prices, 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. At December 31, 2011, the most significant derivatives classified as Level 3 were a power option sold by CMS ERM and FTRs held by Consumers. At December 31, 2010, the most significant derivative classified as Level 3 was an electricity sales agreement held by CMS ERM. In valuing their derivative instruments not classified as Level 1, CMS Energy and Consumers may incorporate adjustments for credit risk, or the risk of nonperformance, as deemed appropriate. For additional details about derivative contracts, see Note 10, Derivative Instruments. ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS USING SIGNIFICANT LEVEL 3 INPUTS Presented in the following table are reconciliations of changes in the fair values of Level 3 assets and liabilities at CMS Energy and Consumers:
Years Ended December 31 |  | 2011 |  |  | 2010 |  |  | 2009 |
|  |  |  |  | In Millions |  |  |  |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | (3 | ) |  | $ | (8 | ) |  | $ | (16 | )
Total gains included in earnings 1 |  |  | 2 |  |  |  | 5 |  |  |  | 7 |
Total gains offset through regulatory accounting |  |  | 2 |  |  |  | 3 |  |  |  | 9 |
Purchases |  |  | 1 |  |  |  | 1 |  |  |  | 1 |
Sales |  |  | (4 | ) |  |  | (1 | ) |  |  | — |
Settlements |  |  | — |  |  |  | (3 | ) |  |  | (9 | )
Balance at end of period |  | $ | (2 | ) |  | $ | (3 | ) |  | $ | (8 | )
Unrealized gains included in earnings relating to assets and liabilities still held at end of period 1 |  | $ | 2 |  |  | $ | 4 |  |  | $ | 6 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 1 |  |  | $ | — |  |  | $ | — |
Total gains offset through regulatory accounting |  |  | 2 |  |  |  | 3 |  |  |  | 9 |
Purchases |  |  | 1 |  |  |  | 1 |  |  |  | 1 |
Settlements |  |  | (2 | ) |  |  | (3 | ) |  |  | (10 | )
Balance at end of period |  | $ | 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 year ended December 31, 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 year ended December 31, 2010:
In Millions |
|  |  | Level 1 |  |  |  | Level 2 |  |  |  | Level 3 |  |  |  | Losses |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets held for sale |  | $ | - |  |  | $ | 5 |  |  | $ | - |  |  | $ | (6 | )
In 2010, CMS Energy wrote down assets held for sale from their carrying amount of $11 million to their fair value of $5 million, resulting in a loss of $6 million, which was recorded in earnings as part of discontinued operations. The fair value was determined based on the price that CMS Energy received for the sale of these assets, which closed in January 2011. CMS Energy had no other nonrecurring fair value measurements and Consumers had no nonrecurring fair value measurements during the years ended December 31, 2010 and 2009.
Consumers Energy Company [Member] |
Fair Value Measurements | 4: 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:
December 31, 2011 |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
|  | In Millions |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 109 |  |  | $ | 109 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 15 |  |  |  | 15 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 4 |  |  |  | 4 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual funds |  |  | 113 |  |  |  | 113 |  |  |  | — |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 3 |  |  |  | 1 |  |  |  | — |  |  |  | 2 |
Total |  | $ | 245 |  |  | $ | 243 |  |  | $ | — |  |  | $ | 2 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 7 |  |  |  | — |  |  |  | 3 |  |  |  | 4 |
Total |  | $ | 11 |  |  | $ | 4 |  |  | $ | 3 |  |  | $ | 4 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 56 |  |  | $ | 56 |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  |  | 14 |  |  |  | 14 |  |  |  | — |  |  |  | — |
CMS Energy common stock |  |  | 35 |  |  |  | 35 |  |  |  | — |  |  |  | — |
Nonqualified deferred compensation plan assets |  |  | 3 |  |  |  | 3 |  |  |  | — |  |  |  | — |
SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | — |
Mutual funds |  |  | 74 |  |  |  | 74 |  |  |  | — |  |  |  | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 2 |
Total |  | $ | 185 |  |  | $ | 183 |  |  | $ | — |  |  | $ | 2 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 3 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
Total |  | $ | 3 |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |
December 31, 2010 |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
|  |  |  |  | In Millions |  |  |  |
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 contracts |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Total |  | $ | 287 |  |  | $ | 258 |  |  | $ | 28 |  |  | $ | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 6 |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |
Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 4 |  |  |  | — |  |  |  | — |  |  |  | 4 |
Total |  | $ | 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 |
Total |  | $ | 121 |  |  | $ | 103 |  |  | $ | 17 |  |  | $ | 1 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Total |  | $ | 4 |  |  | $ | 4 |  |  | $ | — |  |  | $ | — |
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. Nonqualified Deferred Compensation Plan Assets: The nonqualified deferred compensation plan assets consist of various mutual funds that are valued using a market approach. CMS Energy and Consumers value these assets using the daily quoted net asset values 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. The SERP invests in mutual funds that hold primarily fixed-income instruments of varying maturities. In order to meet their investment objectives, the funds hold investment-grade debt securities, and may invest a portion of their assts in high-yield securities, foreign debt, and derivative instruments. CMS Energy and Consumers value these funds using the daily quoted net asset values that are the basis for transactions to buy or sell shares in each fund. At December 31, 2010, the SERP held state and municipal bonds, which were valued using a matrix pricing model incorporating Level 2 market-based information. The fair value of the bonds was 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 9, 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. CMS Energy has exchange-traded derivative contracts that are valued based on Level 1 quoted prices, 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. At December 31, 2011, the most significant derivatives classified as Level 3 were a power option sold by CMS ERM and FTRs held by Consumers. At December 31, 2010, the most significant derivative classified as Level 3 was an electricity sales agreement held by CMS ERM. In valuing their derivative instruments not classified as Level 1, CMS Energy and Consumers may incorporate adjustments for credit risk, or the risk of nonperformance, as deemed appropriate. For additional details about derivative contracts, see Note 10, Derivative Instruments. ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS USING SIGNIFICANT LEVEL 3 INPUTS Presented in the following table are reconciliations of changes in the fair values of Level 3 assets and liabilities at CMS Energy and Consumers:
Years Ended December 31 |  | 2011 |  |  | 2010 |  |  | 2009 |
|  |  |  |  | In Millions |  |  |  |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | (3 | ) |  | $ | (8 | ) |  | $ | (16 | )
Total gains included in earnings 1 |  |  | 2 |  |  |  | 5 |  |  |  | 7 |
Total gains offset through regulatory accounting |  |  | 2 |  |  |  | 3 |  |  |  | 9 |
Purchases |  |  | 1 |  |  |  | 1 |  |  |  | 1 |
Sales |  |  | (4 | ) |  |  | (1 | ) |  |  | — |
Settlements |  |  | — |  |  |  | (3 | ) |  |  | (9 | )
Balance at end of period |  | $ | (2 | ) |  | $ | (3 | ) |  | $ | (8 | )
Unrealized gains included in earnings relating to assets and liabilities still held at end of period 1 |  | $ | 2 |  |  | $ | 4 |  |  | $ | 6 |
CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 1 |  |  | $ | — |  |  | $ | — |
Total gains offset through regulatory accounting |  |  | 2 |  |  |  | 3 |  |  |  | 9 |
Purchases |  |  | 1 |  |  |  | 1 |  |  |  | 1 |
Settlements |  |  | (2 | ) |  |  | (3 | ) |  |  | (10 | )
Balance at end of period |  | $ | 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 year ended December 31, 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 year ended December 31, 2010:
In Millions |
|  |  | Level 1 |  |  |  | Level 2 |  |  |  | Level 3 |  |  |  | Losses |
CMS ENERGY, INCLUDING CONSUMERS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets held for sale |  | $ | - |  |  | $ | 5 |  |  | $ | - |  |  | $ | (6 | )
In 2010, CMS Energy wrote down assets held for sale from their carrying amount of $11 million to their fair value of $5 million, resulting in a loss of $6 million, which was recorded in earnings as part of discontinued operations. The fair value was determined based on the price that CMS Energy received for the sale of these assets, which closed in January 2011. CMS Energy had no other nonrecurring fair value measurements and Consumers had no nonrecurring fair value measurements during the years ended December 31, 2010 and 2009.

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
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