FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We use various methods to determine fair value, including market, income, and cost approaches. With these approaches, we adopt certain assumptions that market participants would use in pricing the asset or liability, including assumptions about market risk or the risks inherent in the inputs to the valuation. Inputs to valuation can be readily observable, market-corroborated, or unobservable. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Authoritative accounting guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value.

All financial assets and liabilities carried at fair value are classified and disclosed in one of three hierarchy levels. See Note 8 – Fair Value Measurements under Part II, Item 8, of the Form 10-K for information related to hierarchy levels. We perform an analysis each quarter to determine the appropriate hierarchy level of the assets and liabilities subject to fair value measurements. Financial assets and liabilities are classified in their entirety according to the lowest level of input that is significant to the fair value measurement. All assets and liabilities whose fair value measurement is based on significant unobservable inputs are classified as Level 3.

The following table describes the valuation techniques and unobservable inputs utilized by the Ameren Companies for the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the periods ended June 30, 2016, and December 31, 2015:



		Fair Value								Weighted Average
		Assets		Liabilities			Valuation Technique(s)	Unobservable Input	Range	Weighted Average
Level 3 Derivative asset and liability – commodity contracts^(a):
2016
	Natural gas	$	—	$	(1	)	Discounted cash flow	Nodal basis ($/mmbtu)^(b)	(0.80) – 0	(0.50)
								Counterparty credit risk (%)^(c)(d)	0.22 – 6	2
								Ameren Illinois credit risk (%)^(c)(d)	0.38	(e)
	Power^(f)	15		(170		)	Discounted cash flow	Average forward peak and off-peak pricing – forwards/swaps ($/MWh)^(g)	27 – 43	30
								Estimated auction price for FTRs ($/MW)^(b)	(309) – 1,509	96
								Nodal basis ($/MWh)^(g)	(9) – (1)	(2)
								Counterparty credit risk (%)^(c)(d)	0.56	(e)
								Ameren Illinois credit risk (%)^(c)(d)	0.38	(e)
							Fundamental energy production model	Estimated future gas prices ($/mmbtu)^(b)	3 – 5	4
								Escalation rate (%)^(b)(h)	4	(e)
							Contract price allocation	Estimated renewable energy credit costs ($/credit)^(b)	5 – 7	6
	Uranium	—		(4		)	Option model	Volatilities (%)^(b)	21	(e)
							Discounted cash flow	Average forward uranium pricing ($/pound)^(b)	27 – 30	29
								Ameren Missouri credit risk (%)^(c)(d)	0.38	(e)
2015
	Natural gas	$	1	$	(1	)	Option model	Volatilities (%)^(b)	35 – 55	45
								Nodal basis ($/mmbtu)^(c)	(0.30) – 0	(0.20)
							Discounted cash flow	Nodal basis ($/mmbtu)^(b)	(0.10) – 0	(0.10)
								Counterparty credit risk (%)^(c)(d)	0.40 – 12	7
								Ameren Missouri credit risk (%)^(c)(d)	0.40	(e)
	Power^(f)	16		(170		)	Discounted cash flow	Average forward peak and off-peak pricing – forwards/swaps ($/MWh)^(g)	22 – 39	29
								Estimated auction price for FTRs ($/MW)^(b)	(270) – 2,057	211
								Nodal basis ($/MWh)^(g)	(10) – (1)	(3)
								Counterparty credit risk (%)^(c)(d)	0.86	(e)
								Ameren Illinois credit risk (%)^(c)(d)	0.40	(e)
							Fundamental energy production model	Estimated future gas prices ($/mmbtu)^(b)	3 – 4	4
								Escalation rate (%)^(b)(h)	3	(e)
							Contract price allocation	Estimated renewable energy credit costs ($/credit)^(b)	5 – 7	6
	Uranium	—		(1		)	Option model	Volatilities (%)^(b)	20	(e)
							Discounted cash flow	Average forward uranium pricing ($/pound)^(b)	35 – 42	37
								Ameren Missouri credit risk (%)^(c)(d)	0.40	(e)


(a)	The derivative asset and liability balances are presented net of counterparty credit considerations.


(b)	Generally, significant increases (decreases) in this input in isolation would result in a significantly higher (lower) fair value measurement.


(c)	Generally, significant increases (decreases) in this input in isolation would result in a significantly lower (higher) fair value measurement.


(d)	Counterparty credit risk is applied only to counterparties with derivative asset balances. Ameren Missouri and Ameren Illinois credit risk is applied only to counterparties with derivative liability balances.


(e)	Not applicable.


(f)	Power valuations use visible third-party pricing evaluated by month for peak and off-peak demand through 2020. Valuations beyond 2020 use fundamentally modeled pricing by month for peak and off-peak demand.


(g)	The balance at Ameren is comprised of Ameren Missouri and Ameren Illinois power contracts, which respond differently to unobservable input changes due to their opposing positions.


(h)	Escalation rate applies to power prices in 2031 and beyond for June 30, 2016 and to power prices in 2026 and beyond for December 31, 2015.

In accordance with applicable authoritative accounting guidance, we consider nonperformance risk in our valuation of derivative instruments by analyzing the credit standing of our counterparties and considering any counterparty credit enhancements (e.g., collateral). The guidance also requires that the fair value measurement of liabilities reflect the nonperformance risk of the reporting entity, as applicable. Therefore, we have factored the impact of our credit standing, as well as any potential credit enhancements, into the fair value measurement of both derivative assets and derivative liabilities. Included in our valuation, and based on current market conditions, is a valuation adjustment for counterparty default derived from market data such as the price of credit default swaps, bond yields, and credit ratings. No gains or losses related to valuation adjustments for counterparty default risk were recorded at Ameren, Ameren Missouri, or Ameren Illinois in the first six months of 2016 or 2015. At June 30, 2016, and December 31, 2015, the counterparty default risk valuation adjustment related to derivative contracts was immaterial for Ameren, Ameren Missouri, and Ameren Illinois.

The following table sets forth, by level within the fair value hierarchy, our assets and liabilities measured at fair value on a recurring basis as of June 30, 2016:



		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Ameren	Derivative assets – commodity contracts^(a):
	Natural gas	$	1	$	5	$	—	$	6
	Power	—		—		15		15
	Total derivative assets – commodity contracts	$	1	$	5	$	15	$	21
	Nuclear decommissioning trust fund:
	Cash and cash equivalents	$	1	$	—	$	—	$	1
	Equity securities:
	U.S. large capitalization	378		—		—		378
	Debt securities:
	U.S. treasury and agency securities	—		129		—		129
	Corporate bonds	—		56		—		56
	Other	—		16		—		16
	Total nuclear decommissioning trust fund	$	379	$	201	$	—	$	580	^(b)
	Total Ameren	$	380	$	206	$	15	$	601
Ameren	Derivative assets – commodity contracts^(a):
Missouri	Natural gas	$	—	$	1	$	—	$	1
	Power	—		—		15		15
	Total derivative assets – commodity contracts	$	—	$	1	$	15	$	16
	Nuclear decommissioning trust fund:
	Cash and cash equivalents	$	1	$	—	$	—	$	1
	Equity securities:
	U.S. large capitalization	378		—		—		378
	Debt securities:
	U.S. treasury and agency securities	—		129		—		129
	Corporate bonds	—		56		—		56
	Other	—		16		—		16
	Total nuclear decommissioning trust fund	$	379	$	201	$	—	$	580	^(b)
	Total Ameren Missouri	$	379	$	202	$	15	$	596
Ameren	Derivative assets – commodity contracts^(a):
Illinois	Natural gas	$	1	$	4	$	—	$	5
Liabilities:
Ameren	Derivative liabilities – commodity contracts^(a):
	Fuel oils	$	14	$	—	$	—	$	14
	Natural gas	—		25		1		26
	Power	—		—		170		170
	Uranium	—		—		4		4
	Total Ameren	$	14	$	25	$	175	$	214
Ameren	Derivative liabilities – commodity contracts^(a):
Missouri	Fuel oils	$	14	$	—	$	—	$	14
	Natural gas	—		9		—		9
	Power	—		—		1		1
	Uranium	—		—		4		4
	Total Ameren Missouri	$	14	$	9	$	5	$	28
Ameren	Derivative liabilities – commodity contracts^(a):
Illinois	Natural gas	$	—	$	16	$	1	$	17
	Power	—		—		169		169
	Total Ameren Illinois	$	—	$	16	$	170	$	186


(a)	The derivative asset and liability balances are presented net of counterparty credit considerations.


(b)	Balance excludes $2 million of receivables, payables, and accrued income, net.

The following table sets forth, by level within the fair value hierarchy, our assets and liabilities measured at fair value on a recurring basis as of December 31, 2015:



		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total
Assets:
Ameren	Derivative assets – commodity contracts^(a):
	Natural gas	$	—	$	1	$	1	$	2
	Power	—		—		16		16
	Total derivative assets – commodity contracts	$	—	$	1	$	17	$	18
	Nuclear decommissioning trust fund:
	Cash and cash equivalents	$	4	$	—	$	—	$	4
	Equity securities:
	U.S. large capitalization	364		—		—		364
	Debt securities:
	U.S. treasury and agency securities	—		109		—		109
	Corporate bonds	—		58		—		58
	Other	—		22		—		22
	Total nuclear decommissioning trust fund	$	368	$	189	$	—	$	557	^(b)
	Total Ameren	$	368	$	190	$	17	$	575
Ameren	Derivative assets – commodity contracts^(a):
Missouri	Natural gas	$	—	$	—	$	1	$	1
	Power	—		—		16		16
	Total derivative assets – commodity contracts	$	—	$	—	$	17	$	17
	Nuclear decommissioning trust fund:
	Cash and cash equivalents	$	4	$	—	$	—	$	4
	Equity securities:
	U.S. large capitalization	364		—		—		364
	Debt securities:
	U.S. treasury and agency securities	—		109		—		109
	Corporate bonds	—		58		—		58
	Other	—		22		—		22
	Total nuclear decommissioning trust fund	$	368	$	189	$	—	$	557	^(b)
	Total Ameren Missouri	$	368	$	189	$	17	$	574
Ameren	Derivative assets – commodity contracts^(a):
Illinois	Natural gas	$	—	$	1	$	—	$	1
Liabilities:
Ameren	Derivative liabilities – commodity contracts^(a):
	Fuel oils	$	29	$	—	$	—	$	29
	Natural gas	1		62		1		64
	Power	—		—		170		170
	Uranium	—		—		1		1
	Total Ameren	$	30	$	62	$	172	$	264
Ameren	Derivative liabilities – commodity contracts^(a):
Missouri	Fuel oils	$	29	$	—	$	—	$	29
	Natural gas	—		13		1		14
	Uranium	—		—		1		1
	Total Ameren Missouri	$	29	$	13	$	2	$	44
Ameren	Derivative liabilities – commodity contracts^(a):
Illinois	Natural gas	$	1	$	49	$	—	$	50
	Power	—		—		170		170
	Total Ameren Illinois	$	1	$	49	$	170	$	220


(a)	The derivative asset and liability balances are presented net of counterparty credit considerations.


(b)	Balance excludes $(1) million of receivables, payables, and accrued income, net.

The following table summarizes the changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2016:



		Net derivative commodity contracts
		Ameren Missouri			Ameren Illinois			Ameren
Natural gas:
Beginning balance at April 1, 2016	$	—		$	(1	)	$	(1	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		—			(1	)		(1	)
Settlements		—			1			1
Ending balance at June 30, 2016	$	—		$	(1	)	$	(1	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2016	$	—		$	(1	)	$	(1	)
Power:
Beginning balance at April 1, 2016	$	6		$	(187	)	$	(181	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		(1	)		14			13
Purchases		13			—			13
Settlements		(4	)		4			—
Ending balance at June 30, 2016	$	14		$	(169	)	$	(155	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2016	$	—		$	14		$	14
Uranium:
Beginning balance at April 1, 2016	$	(4	)	$	(a)		$	(4	)
Ending balance at June 30, 2016	$	(4	)	$	(a)		$	(4	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2016	$	—		$	(a)		$	—


(a)	Not applicable.

The following table summarizes the changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2015:



		Net derivative commodity contracts
		Ameren Missouri			Ameren Illinois			Ameren
Fuel oils:
Beginning balance at April 1, 2015	$	(6	)	$	(a)		$	(6	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		1			(a)			1
Settlements		2			(a)			2
Transfers out of Level 3		2			(a)			2
Ending balance at June 30, 2015	$	(1	)	$	(a)		$	(1	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2015	$	3		$	(a)		$	3
Natural gas:
Beginning balance at April 1, 2015	$	(1	)	$	1		$	—
Purchases		—			(1	)		(1	)
Settlements		1			(1	)		—
Ending balance at June 30, 2015	$	—		$	(1	)	$	(1	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2015	$	—		$	—		$	—
Power:
Beginning balance at April 1, 2015	$	4		$	(164	)	$	(160	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		—			(4	)		(4	)
Purchases		29			—			29
Settlements		(6	)		3			(3	)
Ending balance at June 30, 2015	$	27		$	(165	)	$	(138	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2015	$	1		$	(5	)	$	(4	)
Uranium:
Beginning balance at April 1, 2015	$	(1	)	$	(a)		$	(1	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		(1	)		(a)			(1	)
Ending balance at June 30, 2015	$	(2	)	$	(a)		$	(2	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2015	$	(1	)	$	(a)		$	(1	)


(a)	Not applicable.

The following table summarizes the changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2016:



		Net derivative commodity contracts
		Ameren Missouri			Ameren Illinois			Ameren
Natural gas:
Beginning balance at January 1, 2016	$	—		$	—		$	—
Realized and unrealized gains (losses) included in regulatory assets/liabilities		—			(1	)		(1	)
Ending balance at June 30, 2016	$	—		$	(1	)	$	(1	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2016	$	—		$	(1	)	$	(1	)
Power:
Beginning balance at January 1, 2016	$	16		$	(170	)	$	(154	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		(4	)		(7	)		(11	)
Purchases		13			—			13
Settlements		(11	)		8			(3	)
Ending balance at June 30, 2016	$	14		$	(169	)	$	(155	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2016	$	—		$	(5	)	$	(5	)
Uranium:
Beginning balance at January 1, 2016	$	(1	)	$	(a)		$	(1	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		(3	)		(a)			(3	)
Ending balance at June 30, 2016	$	(4	)	$	(a)		$	(4	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2016	$	(3	)	$	(a)		$	(3	)


(a)	Not applicable.

The following table summarizes the changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2015:



		Net derivative commodity contracts
		Ameren Missouri			Ameren Illinois			Ameren
Fuel oils:
Beginning balance at January 1, 2015	$	(6	)	$	(a)		$	(6	)
Settlements		3			(a)			3
Transfers out of Level 3		2			(a)			2
Ending balance at June 30, 2015	$	(1	)	$	(a)		$	(1	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2015	$	—		$	(a)		$	—
Natural gas:
Beginning balance at January 1, 2015	$	(1	)	$	—		$	(1	)
Settlements		1			(1	)		—
Ending balance at June 30, 2015	$	—		$	(1	)	$	(1	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2015	$	—		$	—		$	—
Power:
Beginning balance at January 1, 2015	$	9		$	(142	)	$	(133	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities		(2	)		(29	)		(31	)
Purchases		29			—			29
Settlements		(9	)		6			(3	)
Ending balance at June 30, 2015	$	27		$	(165	)	$	(138	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2015	$	—		$	(29	)	$	(29	)
Uranium:
Beginning balance at January 1, 2015	$	(2	)	$	(a)		$	(2	)
Ending balance at June 30, 2015	$	(2	)	$	(a)		$	(2	)
Change in unrealized gains (losses) related to assets/liabilities held at June 30, 2015	$	—		$	(a)		$	—


(a)	Not applicable.

Transfers into or out of Level 3 represent either (1) existing assets and liabilities that were previously categorized as a higher level, but were recategorized to Level 3 because the inputs to the model became unobservable during the period, or (2) existing assets and liabilities that were previously classified as Level 3, but were recategorized to a higher level because the lowest significant input became observable during the period. Transfers between Level 1 and Level 3 for fuel oils were primarily caused by changes in availability of similar financial trades observable on electronic exchanges between the periods. Any reclassifications are reported as transfers out of Level 3 at the fair value measurement reported at the beginning of the period in which the changes occur. For the three and six months ended June 30, 2016, and 2015, there were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 related to derivative commodity contracts.

The Ameren Companies’ carrying amounts of cash and cash equivalents approximate fair value because of the short-term nature of these instruments. They are considered to be Level 1 in the fair value hierarchy. The Ameren Companies' short-term borrowings also approximate fair value because of their short-term nature. Short-term borrowings are considered to be Level 2 in the fair value hierarchy as they are valued based on market rates for similar market transactions. The estimated fair value of long-term debt and preferred stock is based on the quoted market prices for same or similar issuances for companies with similar credit profiles or on the current rates offered to the Ameren Companies for similar financial instruments, which fair value measurement is considered to be Level 2 in the fair value hierarchy.

The following table presents the carrying amounts and estimated fair values of our long-term debt, capital lease obligations and preferred stock at June 30, 2016, and December 31, 2015:



	June 30, 2016				December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Ameren:
Long-term debt and capital lease obligations (including current portion)	$	7,036	$	7,973	$	7,275	$	7,814
Preferred stock^(a)	142		127		142		125
Ameren Missouri:
Long-term debt and capital lease obligations (including current portion)	$	3,999	$	4,539	$	4,110	$	4,449
Preferred stock	80		77		80		75
Ameren Illinois:
Long-term debt (including current portion)	$	2,343	$	2,692	$	2,471	$	2,665
Preferred stock	62		50		62		50


(a)	Preferred stock is recorded in “Noncontrolling Interests” on the consolidated balance sheet.