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 the following three hierarchy levels:

Level 1: Inputs based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities are primarily exchange-traded derivatives and assets, including cash and cash equivalents and listed equity securities, such as those held in Ameren Missouri’s nuclear decommissioning trust fund.

The market approach is used to measure the fair value of equity securities held in Ameren Missouri's nuclear decommissioning trust fund. Equity securities in this fund are representative of the S&P 500 index, excluding securities of Ameren Corporation, owners and/or operators of nuclear power plants, and the trustee and investment managers. The S&P 500 index comprises stocks of large-capitalization companies.

Level 2: Market-based inputs corroborated by third-party brokers or exchanges based on transacted market data. Level 2 assets and liabilities include certain assets held in Ameren Missouri’s nuclear decommissioning trust fund, including corporate bonds and other fixed-income securities, United States Treasury and agency securities, and certain over-the-counter derivative instruments, including natural gas and financial power transactions.

Fixed income securities are valued by using prices from independent industry-recognized data vendors who provide values that are either exchange-based or matrix-based. The fair value measurements of fixed-income securities classified as Level 2 are based on inputs other than quoted prices that are observable for the asset or liability. Examples are matrix pricing, market corroborated pricing, and inputs such as yield curves and indices. Level 2 fixed income securities in the nuclear decommissioning trust fund are primarily corporate bonds, asset-backed securities, and United States agency bonds.

Derivative instruments classified as Level 2 are valued by corroborated observable inputs, such as pricing services or prices from similar instruments that trade in liquid markets. Our development and corroboration process entails obtaining multiple quotes or prices from outside sources. To derive our forward view to price our derivative instruments at fair value, we average the bid/ask spreads to the midpoints. To validate forward prices obtained from outside parties, we compare the pricing to recently settled market transactions. Additionally, a review of all sources is performed to identify any anomalies or potential errors. Further, we consider the volume of transactions on certain trading platforms in our reasonableness assessment of the averaged midpoints. The value of natural gas derivative contracts is based upon exchange closing prices without significant unobservable adjustments. The value of power derivatives contracts is based upon the use of multiple forward prices provided by third parties. The prices are averaged and shaped to a monthly profile when needed without significant unobservable adjustments.

Level 3: Unobservable inputs that are not corroborated by market data. Level 3 assets and liabilities are valued by internally developed models and assumptions or methodologies that use significant unobservable inputs. Level 3 assets and liabilities include derivative instruments that trade in less liquid markets, where pricing is largely unobservable. We value Level 3 instruments by using pricing models with inputs that are often unobservable in the market, such as certain internal assumptions, quotes or prices from outside sources not supported by a liquid market, or escalation rates. Our development and corroboration process entails reasonableness reviews and an evaluation of all sources to identify any anomalies or potential errors.

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 December 31, 2016 and 2015:

Fair Value

Weighted

Assets

Liabilities

Valuation Technique(s)

Unobservable Input

Range

Average

Level 3 Derivative asset and liability – commodity contracts^(a):

2016

Fuel oils

—

Option model

Volatilities(%)^(b)

24 – 66

Discounted cash flow

Counterparty credit risk(%)^(c)(d)

0.13 – 0.22

0.15

Ameren Missouri credit risk(%)^(c)(d)

0.38

(e)

Escalation rate(%)^(b)(f)

(2) – 2

Natural Gas

)

Option model

Volatilities(%)^(b)

31 – 66

Nodal basis($/mmbtu)^(b)

(0.40) – (0.10)

(0.20)

Discounted cash flow

Nodal basis($/mmbtu)^(b)

(0.80) – 0

(0.50)

Counterparty credit risk(%)^(c)(d)

0.13 – 8

Ameren Illinois credit risk(%)^(c)(d)

0.38

(e)

Power^(g)

(187

)

Discounted cash flow

Average forward peak and off-peak pricing – forwards/swaps($/MWh)^(h)

26 – 44

Estimated auction price for FTRs($/MW)^(b)

(71) – 5,270

125

Nodal basis($/MWh)^(h)

(6) – 0

(2)

Ameren Illinois credit risk(%)^(c)(d)

0.38

(e)

Fundamental energy production model

Estimated future natural gas prices($/mmbtu)^(b)

3 – 4

Escalation rate(%)^(b)(i)

(e)

Contract price allocation

Estimated renewable energy credit costs($/credit)^(b)

5 – 7

Uranium

—

)

Option model

Volatilities(%)^(b)

(e)

Discounted cash flow

Average forward uranium pricing($/pound)^(b)

22 – 24

Ameren Missouri credit risk(%)^(c)(d)

0.38

(e)

2015

Natural Gas

)

Option model

Volatilities(%)^(b)

35 – 55

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

Ameren Missouri credit risk(%)^(c)(d)

0.40

(e)

Power^(g)

(170

)

Discounted cash flow

Average forward peak and off-peak pricing – forwards/swaps($/MWh)^(h)

22 – 39

Estimated auction price for FTRs($/MW)^(b)

(270) – 2,057

211

Nodal basis($/MWh)^(h)

(10) – (1)

(3)

Fair Value

Weighted

Assets

Liabilities

Valuation Technique(s)

Unobservable Input

Range

Average

Counterparty credit risk(%)^(c)(d)

0.86

(e)

Ameren Illinois credit risk(%)^(c)(d)

0.40

(e)

Fundamental energy production model

Estimated future natural gas prices($/mmbtu)^(b)

3 – 4

Escalation rate(%)^(b)(i)

(e)

Contract price allocation

Estimated renewable energy credit costs($/credit)^(b)

5 – 7

Uranium

—

)

Option model

Volatilities(%)^(b)

(e)

Discounted cash flow

Average forward uranium pricing($/pound)^(b)

35 – 42

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)	Escalation rate applies to fuel oil prices 2019 and beyond.


(g)	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.


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


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

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 2016, 2015 or 2014. At December 31, 2016 and 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 December 31, 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):
	Fuel oils	$	2	$	—	$	1	$	3
	Natural gas	2		12		1		15
	Power	—		—		9		9
	Total derivative assets – commodity contracts	$	4	$	12	$	11	$	27
	Nuclear decommissioning trust fund:
	Cash and cash equivalents	$	1	$	—	$	—	$	1
	Equity securities:
	U.S. large capitalization	408		—		—		408
	Debt securities:
	U.S. Treasury and agency securities	—		112		—		112
	Corporate bonds	—		67		—		67
	Other	—		17		—		17
	Total nuclear decommissioning trust fund	$	409	$	196	$	—	$	605	^(b)
	Total Ameren	$	413	$	208	$	11	$	632
Ameren Missouri	Derivative assets – commodity contracts^(a):



		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
	Fuel oils	$	2	$	—	$	1	$	3
	Natural gas	—		1		1		2
	Power	—		—		9		9
	Total derivative assets – commodity contracts	$	2	$	1	$	11	$	14
	Nuclear decommissioning trust fund:
	Cash and cash equivalents	$	1	$	—	$	—	$	1
	Equity securities:
	U.S. large capitalization	408		—		—		408
	Debt securities:
	U.S. Treasury and agency securities	—		112		—		112
	Corporate bonds	—		67		—		67
	Other	—		17		—		17
	Total nuclear decommissioning trust fund	$	409	$	196	$	—	$	605	^(b)
	Total Ameren Missouri	$	411	$	197	$	11	$	619
Ameren Illinois	Derivative assets – commodity contracts^(a):
	Natural gas	$	2	$	11	$	—	$	13
Liabilities:
Ameren	Derivative liabilities – commodity contracts^(a):
	Fuel oils	$	5	$	—	$	—	$	5
	Natural gas	—		13		1		14
	Power	—		1		187		188
	Uranium	—		—		4		4
	Total Ameren	$	5	$	14	$	192	$	211
Ameren Missouri	Derivative liabilities – commodity contracts^(a):
	Fuel oils	$	5	$	—	$	—	$	5
	Natural gas	—		6		—		6
	Power	—		1		2		3
	Uranium	—		—		4		4
	Total Ameren Missouri	$	5	$	7	$	6	$	18
Ameren Illinois	Derivative liabilities – commodity contracts^(a):
	Natural gas	$	—	$	7	$	1	$	8
	Power	—		—		185		185
	Total Ameren Illinois	$	—	$	7	$	186	$	193


(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



		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
	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 Missouri	Derivative assets – commodity contracts^(a):
	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 Illinois	Derivative assets – commodity contracts^(a):
	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 Missouri	Derivative liabilities – commodity contracts^(a):
	Fuel oils	$	29	$	—	$	—	$	29
	Natural gas	—		13		1		14
	Uranium	—		—		1		1
	Total Ameren Missouri	$	29	$	13	$	2	$	44
Ameren Illinois	Derivative liabilities – commodity contracts^(a):
	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.

All costs related to financial assets and liabilities, including those classified as Level 3 in the fair value hierarchy are expected to be recoverable through customer rates; therefore, there is no impact to net income resulting from changes in the fair value of these instruments. For the years ended December 31, 2016 and 2015, the balances and changes in the fair value of Level 3 financial assets and liabilities associated with fuel oils, natural gas, and uranium were immaterial.

The following table summarizes the changes in the fair value of power financial assets and liabilities classified as Level 3 in the fair value hierarchy:



		Net Derivative Commodity Contracts
		Ameren Missouri			Ameren Illinois			Ameren
For the year ended December 31, 2015
Beginning balance at January 1, 2015	$	9		$	(142	)	$	(133	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities:		2			(41	)		(39	)
Purchases		29			—			29
Settlements		(23	)		13			(10	)
Transfers out of Level 3		(1	)		—			(1	)
Ending balance at December 31, 2015	$	16		$	(170	)	$	(154	)
Change in unrealized gains (losses) related to assets/liabilities held at December 31, 2015	$	—		$	(39	)	$	(39	)
For the year ended December 31, 2016
Beginning balance at January 1, 2016	$	16		$	(170	)	$	(154	)
Realized and unrealized gains (losses) included in regulatory assets/liabilities:		(1	)		(29	)		(30	)
Purchases		13			—			13
Settlements		(21	)		14			(7	)
Ending balance at December 31, 2016	$	7		$	(185	)	$	(178	)
Change in unrealized gains (losses) related to assets/liabilities held at December 31, 2016	$	—		$	(27	)	$	(27	)

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. For the years ended December 31, 2016 and 2015, there were no material transfers between Level 1 and Level 2, Level 1 and Level 3, or Level 2 and Level 3 related to derivative commodity contracts.

See Note 11 – Retirement Benefits for the fair value hierarchy tables detailing Ameren’s pension and postretirement plan assets as of December 31, 2016, as well as a table summarizing the changes in Level 3 plan assets during 2016.

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 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 December 31, 2016 and 2015:



	2016				2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Ameren:^(a)
Long-term debt and capital lease obligations (including current portion)	$	7,276	$	7,772	$	7,275	$	7,814
Preferred stock	142		131		142		125
Ameren Missouri:
Long-term debt and capital lease obligations (including current portion)	$	3,994	$	4,304	$	4,110	$	4,449
Preferred stock	80		79		80		75
Ameren Illinois:
Long-term debt (including current portion)	$	2,588	$	2,765	$	2,471	$	2,665
Preferred stock	62		52		62		50


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