XML 133 R14.htm IDEA: XBRL DOCUMENT v2.4.0.8
Fair Value Measurements
 12 Months Ended
Dec. 31, 2013
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.

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, recorded at fair value on a recurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

December 31, 2013

 

December 31, 2012

 

 

 

 

 

Level

 

 

 

 

Level

 

 

Total 
1 
2 
3 

 

Total 
1 
2 
3 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$
87 

 

$
87 

 

$

 -

 

$

 -

 

 

$
53 

 

$
53 

 

$

 -

 

$

 -

 

Restricted cash equivalents

 

 
16 

 

 
16 

 

 

 -

 

 

 -

 

 

 
14 

 

 
14 

 

 

 -

 

 

 -

 

Nonqualified deferred
   compensation plan assets

 

 
6 

 

 
6 

 

 

 -

 

 

 -

 

 

 
5 

 

 
5 

 

 

 -

 

 

 -

 

DB SERP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 
2 

 

 
2 

 

 

 -

 

 

 -

 

Mutual funds

 

 
136 

 

 
136 

 

 

 -

 

 

 -

 

 

 
126 

 

 
126 

 

 

 -

 

 

 -

 

Derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

 
5 

 

 

 -

 

 
1 

 

 
4 

 

 

 
3 

 

 

 -

 

 

 -

 

 
3 

 

Total

 

$
250 

 

$
245 

 

$
1 

 

$
4 

 

 

$
203 

 

$
200 

 

$

 -

 

$
3 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonqualified deferred
   compensation plan liabilities

 

$
6 

 

$
6 

 

$

 -

 

$

 -

 

 

$
5 

 

$
5 

 

$

 -

 

$

 -

 

Derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

 
1 

 

 

 -

 

 
1 

 

 

 -

 

 

 
4 

 

 

 -

 

 
3 

 

 
1 

 

Total

 

$
7 

 

$
6 

 

$
1 

 

$

 -

 

 

$
9 

 

$
5 

 

$
3 

 

$
1 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted cash equivalents

 

$
15 

 

$
15 

 

$

 -

 

$

 -

 

 

$
13 

 

$
13 

 

$

 -

 

$

 -

 

CMS Energy common stock

 

 
29 

 

 
29 

 

 

 -

 

 

 -

 

 

 
32 

 

 
32 

 

 

 -

 

 

 -

 

Nonqualified deferred
   compensation plan assets

 

 
4 

 

 
4 

 

 

 -

 

 

 -

 

 

 
4 

 

 
4 

 

 

 -

 

 

 -

 

DB SERP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 
1 

 

 
1 

 

 

 -

 

 

 -

 

Mutual funds

 

 
95 

 

 
95 

 

 

 -

 

 

 -

 

 

 
85 

 

 
85 

 

 

 -

 

 

 -

 

Derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

 
4 

 

 

 -

 

 

 -

 

 
4 

 

 

 
2 

 

 

 -

 

 

 -

 

 
2 

 

Total

 

$
147 

 

$
143 

 

$

 -

 

$
4 

 

 

$
137 

 

$
135 

 

$

 -

 

$
2 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonqualified deferred
   compensation plan liabilities

 

$
4 

 

$
4 

 

$

 -

 

$

 -

 

 

$
4 

 

$
4 

 

$

 -

 

$

 -

 

Total

 

$
4 

 

$
4 

 

$

 -

 

$

 -

 

 

$
4 

 

$
4 

 

$

 -

 

$

 -

 

 

Cash Equivalents:  Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity.  Short-term debt instruments classified as restricted 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 NAVs that are publicly available and are the basis for transactions to buy or sell shares in each fund.  CMS Energy and Consumers value their nonqualified 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 the assets in other non‑current assets and the liabilities in other non‑current liabilities on their consolidated balance sheets.

DB SERP Assets:  CMS Energy and Consumers value their DB SERP assets using a market approach that incorporates quoted market prices.  The DB SERP cash equivalents consist of a money market fund with daily liquidity.  The DB 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 NAVs that are publicly available and are the basis for transactions to buy or sell shares in each fund.  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 and values other derivatives using Level 2 inputs, including commodity forward prices and credit risk factors.  CMS Energy and Consumers have classified certain derivatives as Level 3 since the fair value measurements incorporate assumptions that cannot be observed or confirmed through market transactions. 

The most significant derivatives classified as Level 3 are FTRs held by Consumers.  Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements.

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31
2013 
2012 
2011 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$
2 

 

$
(2)

 

$
(3)

 

Total gains included in earnings1

 

 

 -

 

 
3 

 

 
2 

 

Total gains offset through regulatory accounting

 

 
3 

 

 
6 

 

 
2 

 

Purchases

 

 

 -

 

 
1 

 

 
1 

 

Sales

 

 

 -

 

 

 -

 

 
(4)

 

Settlements

 

 
(1)

 

 
(6)

 

 

 -

 

Balance at end of period

 

$
4 

 

$
2 

 

$
(2)

 

Unrealized gains (losses) included in earnings relating to assets and liabilities

 

 

 

 

 

 

 

 

 

 

still held at end of period1

 

$
(1)

 

$
2 

 

$
2 

 

Consumers

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$
2 

 

$
2 

 

$
1 

 

Total gains offset through regulatory accounting

 

 
3 

 

 
6 

 

 
2 

 

Purchases

 

 

 -

 

 
1 

 

 
1 

 

Settlements

 

 
(1)

 

 
(7)

 

 
(2)

 

Balance at end of period

 

$
4 

 

$
2 

 

$
2 

 

 

1CMS Energy records realized and unrealized gains and losses for Level 3 recurring fair value measurements in earnings as a component of operating revenue or maintenance and other operating expenses on its consolidated statements of income. 

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.

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, recorded at fair value on a recurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

 

December 31, 2013

 

December 31, 2012

 

 

 

 

 

Level

 

 

 

 

Level

 

 

Total 
1 
2 
3 

 

Total 
1 
2 
3 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$
87 

 

$
87 

 

$

 -

 

$

 -

 

 

$
53 

 

$
53 

 

$

 -

 

$

 -

 

Restricted cash equivalents

 

 
16 

 

 
16 

 

 

 -

 

 

 -

 

 

 
14 

 

 
14 

 

 

 -

 

 

 -

 

Nonqualified deferred
   compensation plan assets

 

 
6 

 

 
6 

 

 

 -

 

 

 -

 

 

 
5 

 

 
5 

 

 

 -

 

 

 -

 

DB SERP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 
2 

 

 
2 

 

 

 -

 

 

 -

 

Mutual funds

 

 
136 

 

 
136 

 

 

 -

 

 

 -

 

 

 
126 

 

 
126 

 

 

 -

 

 

 -

 

Derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

 
5 

 

 

 -

 

 
1 

 

 
4 

 

 

 
3 

 

 

 -

 

 

 -

 

 
3 

 

Total

 

$
250 

 

$
245 

 

$
1 

 

$
4 

 

 

$
203 

 

$
200 

 

$

 -

 

$
3 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonqualified deferred
   compensation plan liabilities

 

$
6 

 

$
6 

 

$

 -

 

$

 -

 

 

$
5 

 

$
5 

 

$

 -

 

$

 -

 

Derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

 
1 

 

 

 -

 

 
1 

 

 

 -

 

 

 
4 

 

 

 -

 

 
3 

 

 
1 

 

Total

 

$
7 

 

$
6 

 

$
1 

 

$

 -

 

 

$
9 

 

$
5 

 

$
3 

 

$
1 

 

Consumers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted cash equivalents

 

$
15 

 

$
15 

 

$

 -

 

$

 -

 

 

$
13 

 

$
13 

 

$

 -

 

$

 -

 

CMS Energy common stock

 

 
29 

 

 
29 

 

 

 -

 

 

 -

 

 

 
32 

 

 
32 

 

 

 -

 

 

 -

 

Nonqualified deferred
   compensation plan assets

 

 
4 

 

 
4 

 

 

 -

 

 

 -

 

 

 
4 

 

 
4 

 

 

 -

 

 

 -

 

DB SERP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 
1 

 

 
1 

 

 

 -

 

 

 -

 

Mutual funds

 

 
95 

 

 
95 

 

 

 -

 

 

 -

 

 

 
85 

 

 
85 

 

 

 -

 

 

 -

 

Derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

 
4 

 

 

 -

 

 

 -

 

 
4 

 

 

 
2 

 

 

 -

 

 

 -

 

 
2 

 

Total

 

$
147 

 

$
143 

 

$

 -

 

$
4 

 

 

$
137 

 

$
135 

 

$

 -

 

$
2 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonqualified deferred
   compensation plan liabilities

 

$
4 

 

$
4 

 

$

 -

 

$

 -

 

 

$
4 

 

$
4 

 

$

 -

 

$

 -

 

Total

 

$
4 

 

$
4 

 

$

 -

 

$

 -

 

 

$
4 

 

$
4 

 

$

 -

 

$

 -

 

 

Cash Equivalents:  Cash equivalents and restricted cash equivalents consist of money market funds with daily liquidity.  Short-term debt instruments classified as restricted 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 NAVs that are publicly available and are the basis for transactions to buy or sell shares in each fund.  CMS Energy and Consumers value their nonqualified 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 the assets in other non‑current assets and the liabilities in other non‑current liabilities on their consolidated balance sheets.

DB SERP Assets:  CMS Energy and Consumers value their DB SERP assets using a market approach that incorporates quoted market prices.  The DB SERP cash equivalents consist of a money market fund with daily liquidity.  The DB 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 NAVs that are publicly available and are the basis for transactions to buy or sell shares in each fund.  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 and values other derivatives using Level 2 inputs, including commodity forward prices and credit risk factors.  CMS Energy and Consumers have classified certain derivatives as Level 3 since the fair value measurements incorporate assumptions that cannot be observed or confirmed through market transactions. 

The most significant derivatives classified as Level 3 are FTRs held by Consumers.  Due to the lack of quoted pricing information, Consumers determines the fair value of its FTRs based on Consumers’ average historical settlements.

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31
2013 
2012 
2011 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$
2 

 

$
(2)

 

$
(3)

 

Total gains included in earnings1

 

 

 -

 

 
3 

 

 
2 

 

Total gains offset through regulatory accounting

 

 
3 

 

 
6 

 

 
2 

 

Purchases

 

 

 -

 

 
1 

 

 
1 

 

Sales

 

 

 -

 

 

 -

 

 
(4)

 

Settlements

 

 
(1)

 

 
(6)

 

 

 -

 

Balance at end of period

 

$
4 

 

$
2 

 

$
(2)

 

Unrealized gains (losses) included in earnings relating to assets and liabilities

 

 

 

 

 

 

 

 

 

 

still held at end of period1

 

$
(1)

 

$
2 

 

$
2 

 

Consumers

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$
2 

 

$
2 

 

$
1 

 

Total gains offset through regulatory accounting

 

 
3 

 

 
6 

 

 
2 

 

Purchases

 

 

 -

 

 
1 

 

 
1 

 

Settlements

 

 
(1)

 

 
(7)

 

 
(2)

 

Balance at end of period

 

$
4 

 

$
2 

 

$
2 

 

 

1CMS Energy records realized and unrealized gains and losses for Level 3 recurring fair value measurements in earnings as a component of operating revenue or maintenance and other operating expenses on its consolidated statements of income.