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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2018
Fair Value Measurements | 5: 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, 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.
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 recorded at fair value on a recurring basis:
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﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿In Millions
﻿ | CMS Energy, including Consumers |  | Consumers |
﻿ | March 31 |  | December 31 |  | March 31 |  | December 31 |
﻿ | 2018 |  | 2017 |  | 2018 |  | 2017 |
﻿Assets1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Cash equivalents |  | $ | 15 |  |  | $ | 74 |  |  | $ | - |  |  | $ | - |
﻿Restricted cash equivalents |  |  | 26 |  |  |  | 17 |  |  |  | 26 |  |  |  | 17 |
﻿CMS Energy common stock |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | 21 |
﻿Nonqualified deferred compensation plan assets |  |  | 14 |  |  |  | 14 |  |  |  | 11 |  |  |  | 10 |
﻿DB SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Cash equivalents |  |  | 6 |  |  |  | 5 |  |  |  | 5 |  |  |  | 4 |
﻿Debt securities |  |  | 137 |  |  |  | 141 |  |  |  | 100 |  |  |  | 102 |
﻿Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Commodity contracts |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 1 |
﻿Total |  | $ | 198 |  |  | $ | 252 |  |  | $ | 143 |  |  | $ | 155 |
﻿Liabilities1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Nonqualified deferred compensation plan liabilities |  | $ | 14 |  |  | $ | 14 |  |  | $ | 11 |  |  | $ | 10 |
﻿Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Commodity contracts |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | - |
﻿Total |  | $ | 14 |  |  | $ | 15 |  |  | $ | 11 |  |  | $ | 10 |
﻿ 1 All assets and liabilities were classified as Level 1 with the exception of some commodity contracts, which were classified as Level 3. Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. Short-term debt instruments classified as cash equivalents on the consolidated balance sheets are not included since they are recorded at amortized cost. Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are valued using the daily quoted net asset values. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect the amount owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report the assets in other non‑current assets and the liabilities in other non‑current liabilities on their consolidated balance sheets. DB SERP Assets: The DB SERP cash equivalents consist of a money market fund with daily liquidity. The DB SERP debt securities consist of U.S. Treasury debt securities and are valued at their daily quoted market prices. CMS Energy and Consumers report their DB SERP assets in other non‑current assets on their consolidated balance sheets. For additional details about DB SERP securities, see Note 6, Financial Instruments. 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 values its exchange-traded derivative contracts based on Level 1 quoted prices. CMS Energy’s and Consumers’ remaining derivatives are classified as Level 3. The majority of these derivatives are FTRs held by Consumers. Consumers uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Under regulatory accounting, all changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements. There was no material activity within the Level 3 category of financial assets and liabilities during the periods presented.
Consumers Energy Company [Member] |
Fair Value Measurements | 5: 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, 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.
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 recorded at fair value on a recurring basis:
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿In Millions
﻿ | CMS Energy, including Consumers |  | Consumers |
﻿ | March 31 |  | December 31 |  | March 31 |  | December 31 |
﻿ | 2018 |  | 2017 |  | 2018 |  | 2017 |
﻿Assets1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Cash equivalents |  | $ | 15 |  |  | $ | 74 |  |  | $ | - |  |  | $ | - |
﻿Restricted cash equivalents |  |  | 26 |  |  |  | 17 |  |  |  | 26 |  |  |  | 17 |
﻿CMS Energy common stock |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | 21 |
﻿Nonqualified deferred compensation plan assets |  |  | 14 |  |  |  | 14 |  |  |  | 11 |  |  |  | 10 |
﻿DB SERP |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Cash equivalents |  |  | 6 |  |  |  | 5 |  |  |  | 5 |  |  |  | 4 |
﻿Debt securities |  |  | 137 |  |  |  | 141 |  |  |  | 100 |  |  |  | 102 |
﻿Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Commodity contracts |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | 1 |
﻿Total |  | $ | 198 |  |  | $ | 252 |  |  | $ | 143 |  |  | $ | 155 |
﻿Liabilities1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Nonqualified deferred compensation plan liabilities |  | $ | 14 |  |  | $ | 14 |  |  | $ | 11 |  |  | $ | 10 |
﻿Derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Commodity contracts |  |  | - |  |  |  | 1 |  |  |  | - |  |  |  | - |
﻿Total |  | $ | 14 |  |  | $ | 15 |  |  | $ | 11 |  |  | $ | 10 |
﻿ 1 All assets and liabilities were classified as Level 1 with the exception of some commodity contracts, which were classified as Level 3. Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. Short-term debt instruments classified as cash equivalents on the consolidated balance sheets are not included since they are recorded at amortized cost. Nonqualified Deferred Compensation Plan Assets and Liabilities: The nonqualified deferred compensation plan assets consist of mutual funds, which are valued using the daily quoted net asset values. CMS Energy and Consumers value their nonqualified deferred compensation plan liabilities based on the fair values of the plan assets, as they reflect the amount owed to the plan participants in accordance with their investment elections. CMS Energy and Consumers report the assets in other non‑current assets and the liabilities in other non‑current liabilities on their consolidated balance sheets. DB SERP Assets: The DB SERP cash equivalents consist of a money market fund with daily liquidity. The DB SERP debt securities consist of U.S. Treasury debt securities and are valued at their daily quoted market prices. CMS Energy and Consumers report their DB SERP assets in other non‑current assets on their consolidated balance sheets. For additional details about DB SERP securities, see Note 6, Financial Instruments. 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 values its exchange-traded derivative contracts based on Level 1 quoted prices. CMS Energy’s and Consumers’ remaining derivatives are classified as Level 3. The majority of these derivatives are FTRs held by Consumers. Consumers uses FTRs to manage price risk related to electricity transmission congestion. An FTR is a financial instrument that entitles its holder to receive compensation or requires its holder to remit payment for congestion-related transmission charges. Under regulatory accounting, all changes in fair value associated with FTRs are deferred as regulatory assets and liabilities until the instruments are settled. Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements. There was no material activity within the Level 3 category of financial assets and liabilities during the periods presented.

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- 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 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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