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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] |
Fair Value Measurements | 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
| September 30 2019 |  | December 31 2018 |  |  | September 30 2019 |  | December 31 2018 |
Assets 1 |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | — |  |  | $ | 27 |  |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  | 29 |  |  | 21 |  |  |  | 25 |  |  | 17 |
CMS Energy common stock |  | — |  |  | — |  |  |  | 1 |  |  | 1 |
Nonqualified deferred compensation plan assets |  | 17 |  |  | 14 |  |  |  | 13 |  |  | 10 |
DB SERP cash equivalents |  | 1 |  |  | 1 |  |  |  | — |  |  | — |
Derivative instruments |  | 2 |  |  | 1 |  |  |  | 2 |  |  | 1 |
Total |  | $ | 49 |  |  | $ | 64 |  |  |  | $ | 41 |  |  | $ | 29 |
Liabilities 1 |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 17 |  |  | $ | 14 |  |  |  | $ | 13 |  |  | $ | 10 |
Derivative instruments |  | 11 |  |  | 3 |  |  |  | 1 |  |  | — |
Total |  | $ | 28 |  |  | $ | 17 |  |  |  | $ | 14 |  |  | $ | 10 |
1 | All assets and liabilities were classified as Level 1 with the exception of derivative contracts, which were classified as Level 2 or Level 3.
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. 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 Cash Equivalents: The DB SERP cash equivalents consist of a money market fund with daily liquidity and are reported in other non‑current assets on CMS Energy and Consumers’ 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’s and Consumers’ derivatives are classified as Level 2 or Level 3. The derivatives classified as Level 2 are interest rate swaps at CMS Energy, which are valued using market‑based inputs. CMS Energy uses interest rate swaps to manage its interest rate risk on certain long‑term debt obligations and certain notes receivable at EnerBank. Certain interest rate swaps are accounted for as cash flow hedges of the future variability of interest payments on debt with a notional amount of $94 million at September 30, 2019. Gains or losses on these swaps are initially reported in other comprehensive income and then, as interest payments are made on the hedged debt, are recognized in earnings within other interest expense on CMS Energy’s consolidated statements of income. CMS Energy recorded no gains or losses in other comprehensive income for the three months ended September 30, 2019 and a $4 million loss for the nine months ended September 30, 2019. There were no material impacts on other interest expense associated with these swaps for the three and nine months ended September 30, 2019. The fair value of these swaps recorded in other liabilities on CMS Energy’s consolidated balance sheets totaled $6 million at September 30, 2019 and $2 million at December 31, 2018. CMS Energy also has other interest rate swaps that economically hedge interest rate risk on debt, but that do not qualify for cash flow hedge accounting; the amounts associated with these swaps were not material for the three and nine months ended September 30, 2019. The interest rate swaps at EnerBank qualify as fair value hedges of long‑term, fixed‑rate notes receivable with a notional amount of $61 million at September 30, 2019. The fair value of these interest rate swaps recorded in other liabilities was $2 million at September 30, 2019. CMS Energy is adjusting the carrying value of the hedged notes receivable for the change in their fair value due to the hedged risk. Both gains and losses on the swaps and the changes to the carrying value of the hedged notes receivable are recorded within operating revenue on CMS Energy’s consolidated statements of income. There were no material amounts recognized in operating revenue associated with these swaps for the three and nine months ended September 30, 2019. The majority of derivatives classified as Level 3 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. 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 categories of assets and liabilities during the periods presented.
Consumers Energy Company |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] |
Fair Value Measurements | 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
| September 30 2019 |  | December 31 2018 |  |  | September 30 2019 |  | December 31 2018 |
Assets 1 |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | — |  |  | $ | 27 |  |  |  | $ | — |  |  | $ | — |
Restricted cash equivalents |  | 29 |  |  | 21 |  |  |  | 25 |  |  | 17 |
CMS Energy common stock |  | — |  |  | — |  |  |  | 1 |  |  | 1 |
Nonqualified deferred compensation plan assets |  | 17 |  |  | 14 |  |  |  | 13 |  |  | 10 |
DB SERP cash equivalents |  | 1 |  |  | 1 |  |  |  | — |  |  | — |
Derivative instruments |  | 2 |  |  | 1 |  |  |  | 2 |  |  | 1 |
Total |  | $ | 49 |  |  | $ | 64 |  |  |  | $ | 41 |  |  | $ | 29 |
Liabilities 1 |  |  |  |  |  |  |  |  |
Nonqualified deferred compensation plan liabilities |  | $ | 17 |  |  | $ | 14 |  |  |  | $ | 13 |  |  | $ | 10 |
Derivative instruments |  | 11 |  |  | 3 |  |  |  | 1 |  |  | — |
Total |  | $ | 28 |  |  | $ | 17 |  |  |  | $ | 14 |  |  | $ | 10 |
1 | All assets and liabilities were classified as Level 1 with the exception of derivative contracts, which were classified as Level 2 or Level 3.
Cash Equivalents: Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity. 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 Cash Equivalents: The DB SERP cash equivalents consist of a money market fund with daily liquidity and are reported in other non‑current assets on CMS Energy and Consumers’ 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’s and Consumers’ derivatives are classified as Level 2 or Level 3. The derivatives classified as Level 2 are interest rate swaps at CMS Energy, which are valued using market‑based inputs. CMS Energy uses interest rate swaps to manage its interest rate risk on certain long‑term debt obligations and certain notes receivable at EnerBank. Certain interest rate swaps are accounted for as cash flow hedges of the future variability of interest payments on debt with a notional amount of $94 million at September 30, 2019. Gains or losses on these swaps are initially reported in other comprehensive income and then, as interest payments are made on the hedged debt, are recognized in earnings within other interest expense on CMS Energy’s consolidated statements of income. CMS Energy recorded no gains or losses in other comprehensive income for the three months ended September 30, 2019 and a $4 million loss for the nine months ended September 30, 2019. There were no material impacts on other interest expense associated with these swaps for the three and nine months ended September 30, 2019. The fair value of these swaps recorded in other liabilities on CMS Energy’s consolidated balance sheets totaled $6 million at September 30, 2019 and $2 million at December 31, 2018. CMS Energy also has other interest rate swaps that economically hedge interest rate risk on debt, but that do not qualify for cash flow hedge accounting; the amounts associated with these swaps were not material for the three and nine months ended September 30, 2019. The interest rate swaps at EnerBank qualify as fair value hedges of long‑term, fixed‑rate notes receivable with a notional amount of $61 million at September 30, 2019. The fair value of these interest rate swaps recorded in other liabilities was $2 million at September 30, 2019. CMS Energy is adjusting the carrying value of the hedged notes receivable for the change in their fair value due to the hedged risk. Both gains and losses on the swaps and the changes to the carrying value of the hedged notes receivable are recorded within operating revenue on CMS Energy’s consolidated statements of income. There were no material amounts recognized in operating revenue associated with these swaps for the three and nine months ended September 30, 2019. The majority of derivatives classified as Level 3 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. 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 categories of assets and liabilities during the periods presented.

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- Definition Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table. + References No definition available. + Details
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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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